The Journal of Real Estate Finance and Economics

, Volume 15, Issue 1, pp 11-26

First online:

Interactions Between Property and Equity Markets: An Investigation of Linkages in the United Kingdom 1972–1992

  • Colin LizieriAffiliated withDepartment of Land Management and Development, Faculty of Urban and Regional Studies, University of Reading
  • , Stephen SatchellAffiliated withFaculty of Economics, University of Cambridge and Fellow of Trinity College

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Two strands of real estate research—that concerned with the relationships between securitized real estate and the underlying market and that dealing with the role of property in the wider economy—rarely are considered together. The paper utilizes the U.K. equity market and property company share data to explore the relationships between real estate and the rest of the economy, using a two-sector analytic model. Causality analysis suggests that the wider economy leads the real estate market in the short term but that, with a longer lag structure, positive real estate returns may point to negative future returns in the rest of the economy. This provides weak confirmatory evidence for theories of capital switching between sectors.

property companies REITs equities capital switching causality testing