Premium
Real estate's information and volatility links with stock, bond and money markets
Author(s) -
Mi Lin,
Hodgson Allan
Publication year - 2018
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12375
Subject(s) - volatility (finance) , economics , real estate , volatility smile , financial economics , implied volatility , stock (firearms) , bond , econometrics , volatility swap , stochastic volatility , finance , mechanical engineering , engineering
We examine real estate's information and volatility linkages with stock, bond and money markets. Based on the theory that the volatility of prices directly reflects of the rate at which information flows to the market (Kyle, [Kyle, A. S., 1985]; Ross, [Ross, S. A., 1989]), we propose that information linkages across markets are revealed in the correlations of their volatilities, rather than correlations of returns. Applying an implied volatility correlation approach and the Generalized Method of Moments (GMM) estimation of Fleming et al . ([Fleming, J., 1998]) stochastic volatility model, we find strong information and volatility linkages across the four markets.