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The Journal of Real Estate Finance and Economics

Erschienen in:

01.10.2007

Volatility Transmission in the Real Estate Spot and Forward Markets

verfasst von: S. K. Wong, K. W. Chau, C. Y. Yiu

Erschienen in: The Journal of Real Estate Finance and Economics | Ausgabe 3/2007

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Abstract

How shocks in one market influence the returns and volatility of other markets has been an important question for portfolio managers. In the finance literature, many studies found evidence of volatility spillovers across international markets, as well as between spot and futures markets. Although real estate is often regarded as a good vehicle for diversification, the dynamics of its volatility transmission have been largely ignored. This paper provides the first study to examine volatility spillovers between the spot and forward (pre-sale) index returns of the Hong Kong real estate market through a bivariate GARCH model. Transaction-based indices were used so that our volatility modelling was free from any smoothing problem. Our results showed that real estate returns exhibited volatility clustering, and the volatility of the forward market was more sensitive to shocks than the spot market. Moreover, volatility was mainly transmitted from the forward market to the spot market, but not vice versa.

Vorheriger Artikel Delinquency and Default in Arms: The Effects of Protected Equity and Loss Aversion

Nächster Artikel Dynamic Residential Housing Cycles Analysis

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The stationarity conclusion is invariant whether or not we included: (1) a trend and an intercept, (2) an intercept without any trend, or (3) neither a trend nor an intercept in the test equation.

The univariate results were further validated by a reviewer with two other sources of the Hong Kong property price index. One is a valuation-based monthly price index compiled by the government. The other is a transaction-based weekly price index compiled using the hedonic pricing model. He showed that our results are robust across index construction methods and data frequency, and supported our GARCH specification without threshold effects. We greatly appreciate the additional analyses performed by the reviewer.

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Titel: Volatility Transmission in the Real Estate Spot and Forward Markets
verfasst von: S. K. Wong
K. W. Chau
C. Y. Yiu
Publikationsdatum: 01.10.2007
Verlag: Springer US
Erschienen in: The Journal of Real Estate Finance and Economics / Ausgabe 3/2007
Print ISSN: 0895-5638
Elektronische ISSN: 1573-045X
DOI: https://doi.org/10.1007/s11146-007-9037-7

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