International Real Estate Review

The primary contribution of this study is to comprehensively assess whether public real estate and stock markets are linked at the local, regional, and global levels, and assess the evolution of their dynamic relationship and gradual integration during the last two decades. For individual pairs of real estate and stock markets, our analysis shows that the current levels of local, regional, and global correlations between real estate and stock markets are time-varying, and at most, moderate at the respective integration levels. The real estate and stock markets are both contemporaneously and causally linked in their returns and volatilities; however, the causality relationship appears weaker. In the long run, the real estate markets have slowly become more integrated with the global and regional stock markets, while less integrated with the local stock markets. In addition, the extracted common factors allow for a direct assessment of the dynamic relationships between the real estate and stock markets as a group, and thereby complement the individual results. Finally, there appears to be a declining real estate and stock return dispersion and differential at the local, regional, and global levels for all nine economies studied in this research work, which indicate a tendency of return convergence between real estate and stock markets in the international environment.