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Asymmetric Volatility, Correlation and Returns Dynamics Between the U.S. and U.K. Securitized Real Estate Markets
Author(s) -
Michayluk David,
Wilson Patrick J.,
Zurbruegg Ralf
Publication year - 2006
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/j.1540-6229.2006.00161.x
Subject(s) - volatility (finance) , real estate , economics , spillover effect , stock (firearms) , financial economics , portfolio , econometrics , emerging markets , monetary economics , finance , microeconomics , mechanical engineering , engineering
We construct synchronously priced indices of securitized property listed on the New York Stock Exchange and London Stock Exchange. The indices are then utilized to examine dynamic information flows between the two markets. By analyzing returns behavior, asymmetric volatility spillover effects and exceedance correlations, this study shows that the real estate markets in these two countries experience significant interaction on a daily basis when synchronously priced data are utilized. These results are different from when close‐to‐close returns are examined, implying that the use of close‐to‐close data can misconstrue the true dynamics that exist between these markets. Results also show significant asymmetric effects on both the volatility and correlation dynamics between the markets. This has several implications for property portfolio managers, indicating that positive and negative news impact the markets differently. This is particularly true for the United Kindom, where daily foreign news from the United States can influence U.K. volatility.