Research Article
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Volatility Transmission Between Housing and Stock Markets In Europe: A Multivariate Garch Perspective

Year 2018, Volume: 18 Issue: 4, 619 - 629, 23.10.2018

Abstract

Over the past decade, the significant changes in the prices of stock and real estate markets have intensified the interest of heightened concern about volatility in these markets. This paper deals with the dynamic return and volatility transmissions across real estate and stock markets in European countries over the period from 1985:Q1 through 2017:Q1. Using VAR-BEKK-GARCH model, we find significant evidence supporting shock and volatility spillover effects from real estate to stock markets in Denmark, Finland, Ireland and Spain whereas evidence running from stock to real estate markets is found in Spain, Sweden and Italy. In contrast, there is no evidence of any such spillovers in Belgium. Overall, these empirical findings provide fresh insights and policy implications in cross-market volatility spillovers for domestic and international investors, and also policy makers, through the potential for improved risk management and more efficient portfolio diversification.


References

  • Apergis, N. and Lambrinidis, L. (2011). More evidence on the relationship between the stock and the real estate market. Briefings Notes in Economics, 85, 1-15.
  • Ambrose, B., Ancel, E. and Griffiths. M. (1992). The Fractal Structure of Real Estate Investment Trust Returns: A Search for Evidence of Market Segmentation and Nonlinear Dependency. Journal of the American Real Estate and Urban Economics Association, 20, 25-54.
  • Anderson, C. W. and Beracha, E. (2012). Frothy housing markets and local stock-price movements. Journal of Real Estate Finance & Economics, 32(2), 161-185.
  • Chaudhry, M. K., Myer F. C. N. and Webb. J. R. (1999). Stationarity and counteraction in systems with real estate and financial assets. Journal of Real Estate Finance and Economics, 18, 339-349.
  • Chen, N. (2001). Asset price fluctuations in Taiwan: evidence from stock and real estate prices 1973 to 1992 Journal of Asian Economics, 12, 215-232.
  • Engle, R. F. (1982). Autoregressive conditional heteroscedasticity with estimates of the variance of UK inflation Econometrica, 50, 987–1008.
  • Engle, R. F. and Kroner, K. F. (1995). Multivariate simultaneous generalized ARCH. Econometric Theory, 11, 122-150.
  • Geltner, D. (1990). Return risk and cash flow risk with long-term riskless leases in commercial real estate. Journal of the American Real Estate and Urban Economics Association, 18, 377-402.
  • Grissom, T. V., Kuhle, J. L. and Walther, C. H. (1987). Diversification works in real estate. Too Journal of Portfolio Management, 3, 66-71.
  • Goodman, A. C. (1978). Hedonic prices, price indices and housing markets. Journal of Urban Economics, 5, 471-484.
  • Goodman, A. C. (1981). Housing submarkets within urban areas: definitions and evidence. Journal of Regional Science, 21, 175-185.
  • Gyourko, J. and Keim, D. (1992). What does the stock market tell us about real estate returns? Journal of the American Real Estate Finance and Urban Economics Association, 20(3), 457-486.
  • Fraser, W. D., Leishman, C. and Tarbert, H. (2002). The long-run diversification attributes of commercial property. Journal of Property Investment and Finance, 20(4), 354–373.
  • Ibrahim, M. H. (2010). House price-stock price relations in Thailand: An empirical analysis. International Journal of Housing Markets and Analysis, 3, 69-82.
  • Kakes, J. and van den End. J.W. (2004). Do stock prices affect house prices? Evidence for the Netherlands. Applied Economics Letters, 11, 741-744.
  • Kapopoulos, P. and Siokis, F. (2005). Stock and real estate prices in Greece: Wealth versus ‘creditprice’ effect. Applied Economics Letters, 12, 125-128.
  • Karolyi, G. A. (1995). A multivariate GARCH model of international transmissions of stock returns and volatility: The case of the United States and Canada. Journal of Business and Economic Statistics, 13, 1125.
  • Kuhle, J. L. (1987). Portfolio diversification and return benefits – common stocks vs real estate investment trusts (REITS). The Journal of Real Estate Research 2, 1-9.
  • Liow, H. K., Ho, K. H. D., Ibrahim, M. F. and Chen, Z. (2009). Correlation and volatility dynamics in international real estate securities markets. Journal of Real Estate Finance and Economics, 39, 202-223.
  • Lu, Y.-C., Chang, T. and Wei, Y.-C. (2007). An empirical note on testing the cointegration relationship between the real estate and stock markets in Taiwan. Economics Bulletin, 3, 1-11.
  • Lean, H.H. and Smyth, R. (2012). Dynamic Interaction Between House Prices and Stock Prices in Malaysia. International Journal of Strategic Property Management, 18(2), 163-177.
  • Lin, P. and Fuerst. F. (2014). The integration of direct real estate and stock markets in Asia. Applied Economics, 46, 1323-1334.
  • Liow, K. H. (2006). Dynamic relationship between stock and property markets. Applied Financial Economics, 16(5), 371-376.
  • Liow, K. H. and Yang, H. S. (2005). Long-term comemories and short-run adjustment: Securitized real estate and stock markets. The Journal of Real Estate Finance and Economics, 31(3), 283-300.
  • Liu, C. H., Hartzell, D. J., Greig, W. and Grissom. T. V. (1990). The integration of the real estate market and the stock market: Some preliminary evidence. Journal of Real Estate Finance and Economics, 3, 261-282.
  • Miles, M., Cole, R. and Guikey, D. (1990). A different look at commercial real estate returns. Journal of the American Real Estate and Urban Economics Association, 18:, 403-430.
  • McMillan, D. (2012). Long-run stock price-house price relation: Evidence from an ESTR model. Economics Bulletin, 32(2), 1737-1746.
  • Michayluk, D.,Wilson, P. and Zurbruegg, R. (2006). Asymmetric volatility, correlation and return dynamics between the us and uk securitized real estate markets. Real Estate Economics, 34(1), 109– 131.
  • Okunev, J., Wilson, P. and Zurbruegg, R. (2000). The causal relationship between real estate and stock markets. Journal of Real Estate Finance and Economics, 21, 252-262.
  • Quan, D. C. and Titman, S. (1999). Do real estate prices and stock prices move together? An international analysis. Real Estate Economics, 27, 183-207.
  • Okunev, J. and Wilson. P. (1997). Using nonlinear tests to examine integration between real estate and stock. Markets Real Estate Economics, 25, 487-503.
  • Piazzesi, M., Schneider, M. and Tuzel, S. (2007). Housing, consumption and asset pricing. Journal of Financial Economics, 83, 531-569.
  • Schnare, A., and Struyk, R. (1976). Segmentation in urban housing markets. Journal of Urban Economics, 3, 146-166.
  • Su, C. W. (2011). Non-linear causality between the stock and real estate markets of western European countries: Evidence from rank. Tests Economic Modelling, 28, 845-851.
  • Su, C. W., Chang, H. L. and Zhu, M. N. (2011). A nonlinear model of causality between the stock and real estate markets of European countries. Romanian Journal of Economic Forecasting, 1, 41-53.
  • Shirvani, H., Mirshab, B. and Delcoure, N. N. (2012). Stock prices, home prices, and private consumption in the US: Some robust bilateral causality tests. Modern Economy, 3, 145-149.
  • Sim, S. H. and Chang, B. K. (2006). Stock and real estate markets in Korea: Wealth or credit-price effect. Journal of Economic Research, 11, 99-122.
  • Sutton, G. D. (2002). Explaining Changes in House Prices, BIS Quarterly Review.
  • Tsai, I. C., Lee, C. F. and Chiang, M. C. (2012). The asymmetric wealth effect in the us housing and stock markets:Evidence from the threshold cointegration model. Journal of Real Estate Finance and Economics, 45, 1005-1020.
  • Wilson, P. J. and Okunev, J. (1996). Evidence of segmentation in domestic and international property markets. Journal of Property Finance, 7, 78-97.
  • Wilson, P. J., Okunev, J. and Ta, G. (1996). Are real estate and securities markets integrated? Some Australian evidence. Journal of Property Valuation and Investment, 14, 7-24.
  • Wilson, P., Okunev, J. (1999). Long-term dependencies and long run non-periodic co-cycles: Real estate and stock markets. Journal of Real Estate Research, 18(2), 257-278.

Avrupa Gayrimenkul Ve Hisse Senedi Piyasaları Arasındaki Oynaklık Yayılımı: Çok Değişkenli Garch Yaklaşımı

Year 2018, Volume: 18 Issue: 4, 619 - 629, 23.10.2018

Abstract

Son yıllarda, hisse senedi ve gayrimenkul piyasasındaki fiyatlarda meydana gelen önemli değişiklikler, bu piyasalarda oynaklığın artmasına neden olmuştur. Bu makale, 1985-2007 yılları arasında Avrupa ülkelerindeki gayrimenkul ve hisse senedi piyasalarındaki dinamik getiri ve oynaklık yayılımını VAR-BEKK-GARCH modeli kullanılarak araştırmaktadır. Makalede, Danimarka, Finlandiya, İrlanda ve İspanya’da gayrimenkul piyasalarından hisse senedi piyasalarına şok ve oynaklık yayılım etkileri tespit edilmiştir. İspanya, İsveç ve İtalya’da ise hisse senedi piyasalarından gayrimenkul piyasalarına doğru bir oynaklık yayılımının söz konusu olduğu gözlenmektedir. Buna karşın, Belçika’da hisse senedi ve gayrimenkul piyasaları arasında herhangi bir yayılma olduğuna dair bir kanıt bulunmamaktadır. Genel olarak, bu ampirik bulgular, gelişmiş risk yönetimi ve daha etkin portföy çeşitlendirme potansiyeli sayesinde yerli ve yabancı yatırımcılar ile politika yapıcılar için piyasalar arası oynaklık yayılmalarında yeni anlayışlar ortaya koymaktadır.

References

  • Apergis, N. and Lambrinidis, L. (2011). More evidence on the relationship between the stock and the real estate market. Briefings Notes in Economics, 85, 1-15.
  • Ambrose, B., Ancel, E. and Griffiths. M. (1992). The Fractal Structure of Real Estate Investment Trust Returns: A Search for Evidence of Market Segmentation and Nonlinear Dependency. Journal of the American Real Estate and Urban Economics Association, 20, 25-54.
  • Anderson, C. W. and Beracha, E. (2012). Frothy housing markets and local stock-price movements. Journal of Real Estate Finance & Economics, 32(2), 161-185.
  • Chaudhry, M. K., Myer F. C. N. and Webb. J. R. (1999). Stationarity and counteraction in systems with real estate and financial assets. Journal of Real Estate Finance and Economics, 18, 339-349.
  • Chen, N. (2001). Asset price fluctuations in Taiwan: evidence from stock and real estate prices 1973 to 1992 Journal of Asian Economics, 12, 215-232.
  • Engle, R. F. (1982). Autoregressive conditional heteroscedasticity with estimates of the variance of UK inflation Econometrica, 50, 987–1008.
  • Engle, R. F. and Kroner, K. F. (1995). Multivariate simultaneous generalized ARCH. Econometric Theory, 11, 122-150.
  • Geltner, D. (1990). Return risk and cash flow risk with long-term riskless leases in commercial real estate. Journal of the American Real Estate and Urban Economics Association, 18, 377-402.
  • Grissom, T. V., Kuhle, J. L. and Walther, C. H. (1987). Diversification works in real estate. Too Journal of Portfolio Management, 3, 66-71.
  • Goodman, A. C. (1978). Hedonic prices, price indices and housing markets. Journal of Urban Economics, 5, 471-484.
  • Goodman, A. C. (1981). Housing submarkets within urban areas: definitions and evidence. Journal of Regional Science, 21, 175-185.
  • Gyourko, J. and Keim, D. (1992). What does the stock market tell us about real estate returns? Journal of the American Real Estate Finance and Urban Economics Association, 20(3), 457-486.
  • Fraser, W. D., Leishman, C. and Tarbert, H. (2002). The long-run diversification attributes of commercial property. Journal of Property Investment and Finance, 20(4), 354–373.
  • Ibrahim, M. H. (2010). House price-stock price relations in Thailand: An empirical analysis. International Journal of Housing Markets and Analysis, 3, 69-82.
  • Kakes, J. and van den End. J.W. (2004). Do stock prices affect house prices? Evidence for the Netherlands. Applied Economics Letters, 11, 741-744.
  • Kapopoulos, P. and Siokis, F. (2005). Stock and real estate prices in Greece: Wealth versus ‘creditprice’ effect. Applied Economics Letters, 12, 125-128.
  • Karolyi, G. A. (1995). A multivariate GARCH model of international transmissions of stock returns and volatility: The case of the United States and Canada. Journal of Business and Economic Statistics, 13, 1125.
  • Kuhle, J. L. (1987). Portfolio diversification and return benefits – common stocks vs real estate investment trusts (REITS). The Journal of Real Estate Research 2, 1-9.
  • Liow, H. K., Ho, K. H. D., Ibrahim, M. F. and Chen, Z. (2009). Correlation and volatility dynamics in international real estate securities markets. Journal of Real Estate Finance and Economics, 39, 202-223.
  • Lu, Y.-C., Chang, T. and Wei, Y.-C. (2007). An empirical note on testing the cointegration relationship between the real estate and stock markets in Taiwan. Economics Bulletin, 3, 1-11.
  • Lean, H.H. and Smyth, R. (2012). Dynamic Interaction Between House Prices and Stock Prices in Malaysia. International Journal of Strategic Property Management, 18(2), 163-177.
  • Lin, P. and Fuerst. F. (2014). The integration of direct real estate and stock markets in Asia. Applied Economics, 46, 1323-1334.
  • Liow, K. H. (2006). Dynamic relationship between stock and property markets. Applied Financial Economics, 16(5), 371-376.
  • Liow, K. H. and Yang, H. S. (2005). Long-term comemories and short-run adjustment: Securitized real estate and stock markets. The Journal of Real Estate Finance and Economics, 31(3), 283-300.
  • Liu, C. H., Hartzell, D. J., Greig, W. and Grissom. T. V. (1990). The integration of the real estate market and the stock market: Some preliminary evidence. Journal of Real Estate Finance and Economics, 3, 261-282.
  • Miles, M., Cole, R. and Guikey, D. (1990). A different look at commercial real estate returns. Journal of the American Real Estate and Urban Economics Association, 18:, 403-430.
  • McMillan, D. (2012). Long-run stock price-house price relation: Evidence from an ESTR model. Economics Bulletin, 32(2), 1737-1746.
  • Michayluk, D.,Wilson, P. and Zurbruegg, R. (2006). Asymmetric volatility, correlation and return dynamics between the us and uk securitized real estate markets. Real Estate Economics, 34(1), 109– 131.
  • Okunev, J., Wilson, P. and Zurbruegg, R. (2000). The causal relationship between real estate and stock markets. Journal of Real Estate Finance and Economics, 21, 252-262.
  • Quan, D. C. and Titman, S. (1999). Do real estate prices and stock prices move together? An international analysis. Real Estate Economics, 27, 183-207.
  • Okunev, J. and Wilson. P. (1997). Using nonlinear tests to examine integration between real estate and stock. Markets Real Estate Economics, 25, 487-503.
  • Piazzesi, M., Schneider, M. and Tuzel, S. (2007). Housing, consumption and asset pricing. Journal of Financial Economics, 83, 531-569.
  • Schnare, A., and Struyk, R. (1976). Segmentation in urban housing markets. Journal of Urban Economics, 3, 146-166.
  • Su, C. W. (2011). Non-linear causality between the stock and real estate markets of western European countries: Evidence from rank. Tests Economic Modelling, 28, 845-851.
  • Su, C. W., Chang, H. L. and Zhu, M. N. (2011). A nonlinear model of causality between the stock and real estate markets of European countries. Romanian Journal of Economic Forecasting, 1, 41-53.
  • Shirvani, H., Mirshab, B. and Delcoure, N. N. (2012). Stock prices, home prices, and private consumption in the US: Some robust bilateral causality tests. Modern Economy, 3, 145-149.
  • Sim, S. H. and Chang, B. K. (2006). Stock and real estate markets in Korea: Wealth or credit-price effect. Journal of Economic Research, 11, 99-122.
  • Sutton, G. D. (2002). Explaining Changes in House Prices, BIS Quarterly Review.
  • Tsai, I. C., Lee, C. F. and Chiang, M. C. (2012). The asymmetric wealth effect in the us housing and stock markets:Evidence from the threshold cointegration model. Journal of Real Estate Finance and Economics, 45, 1005-1020.
  • Wilson, P. J. and Okunev, J. (1996). Evidence of segmentation in domestic and international property markets. Journal of Property Finance, 7, 78-97.
  • Wilson, P. J., Okunev, J. and Ta, G. (1996). Are real estate and securities markets integrated? Some Australian evidence. Journal of Property Valuation and Investment, 14, 7-24.
  • Wilson, P., Okunev, J. (1999). Long-term dependencies and long run non-periodic co-cycles: Real estate and stock markets. Journal of Real Estate Research, 18(2), 257-278.
There are 42 citations in total.

Details

Primary Language English
Journal Section Research Article
Authors

Gülin Vardar This is me 0000-0002-8404-4355

Berna Aydoğan 0000-0002-5232-597X

Publication Date October 23, 2018
Acceptance Date August 13, 2018
Published in Issue Year 2018 Volume: 18 Issue: 4

Cite

APA Vardar, G., & Aydoğan, B. (2018). Volatility Transmission Between Housing and Stock Markets In Europe: A Multivariate Garch Perspective. Ege Academic Review, 18(4), 619-629.
AMA Vardar G, Aydoğan B. Volatility Transmission Between Housing and Stock Markets In Europe: A Multivariate Garch Perspective. ear. October 2018;18(4):619-629.
Chicago Vardar, Gülin, and Berna Aydoğan. “Volatility Transmission Between Housing and Stock Markets In Europe: A Multivariate Garch Perspective”. Ege Academic Review 18, no. 4 (October 2018): 619-29.
EndNote Vardar G, Aydoğan B (October 1, 2018) Volatility Transmission Between Housing and Stock Markets In Europe: A Multivariate Garch Perspective. Ege Academic Review 18 4 619–629.
IEEE G. Vardar and B. Aydoğan, “Volatility Transmission Between Housing and Stock Markets In Europe: A Multivariate Garch Perspective”, ear, vol. 18, no. 4, pp. 619–629, 2018.
ISNAD Vardar, Gülin - Aydoğan, Berna. “Volatility Transmission Between Housing and Stock Markets In Europe: A Multivariate Garch Perspective”. Ege Academic Review 18/4 (October 2018), 619-629.
JAMA Vardar G, Aydoğan B. Volatility Transmission Between Housing and Stock Markets In Europe: A Multivariate Garch Perspective. ear. 2018;18:619–629.
MLA Vardar, Gülin and Berna Aydoğan. “Volatility Transmission Between Housing and Stock Markets In Europe: A Multivariate Garch Perspective”. Ege Academic Review, vol. 18, no. 4, 2018, pp. 619-2.
Vancouver Vardar G, Aydoğan B. Volatility Transmission Between Housing and Stock Markets In Europe: A Multivariate Garch Perspective. ear. 2018;18(4):619-2.