The Relationship Between Geopolitical Risks and Housing Returns in Türkiye: Evidence from the Cross - Quantilogram

Year 2022, , 59 - 71, 12.01.2023

Engin Bekar

https://doi.org/10.33818/ier.1167057

Abstract

The aim of the study is to analyze whether geopolitical risks have an effect on housing returns in Türkiye based on the data for the period January 2010 – September 2021. Considering its geography, Türkiye is one of the countries most likely to be exposed to geopolitical risks in the world. For this reason, from the point of view of both domestic and foreign investors investing in housing market, it is important to know whether this situation affects real estate returns, especially in periods when the growth in geopolitical risks is high and very high. For this purpose, in this study, the Cross-Quantilogram method introduced in the paper of Han et al.(2016), which is a robust measure of quantile dependence of two variables, was used. As a result of the analysis, it is seen that median and high-level geopolitical risks do not have an effect on housing prices or housing returns, but very high geopolitical risks have a short-term negative effect on returns. Based on all the findings, it is concluded that the geopolitical risks in Türkiye do not have a significant and permanent effect on the housing market.

Keywords

Geopolitical Risk Historical Index, Housing Price Index, Quantile Dependence, Directional Predictability, Cross-Quantilogram

References

• Ajmi, A.N., Babalos, V., Economou F. & Gupta, R. (2015). Real Estate Market and Uncertainty Shocks: A Novel Variance Causality Approach. Frontiers in Finance and Economics, 12(2), 56-85.
• André, C., Bonga-Bonga, L., Gupta, R. & Mwamba, J.W.M. (2017). Economic Policy Uncertainty, U.S. Real Housing Returns and Their Volatility: A Nonparametric Approach. Journal of Real Estate Research, 39(4), 493-514.
• Antonakakis, N., Gupta, R. & André, C. (2015). Dynamic Co-movements between Economic Policy Uncertainty and Housing Market Returns. Journal of Real Estate Portfolio Management, 21(1), 53-60.
• Antonakakis, N., Gupta, R., Kollias, C. & Papadamou, S. (2017). Geopolitical Risks and the oil-stock nexus over 1899-2016. Finance Research Letters, 23, 165-173.
• Aye, G. C. (2018). Causality between economic policy uncertainty and real housing returns in emerging economies: A cross-sample validation approach. Cogent Economics and Finance, 6(1), 1-16.
• Aysan, A. F., Demir, E., Gozgor, G. & Lau, C.K.M. (2019). Effects of the geopolitical risks on Bitcoin returns and volatility. Research in International Business and Finance, 47, 511-518.
• Balcılar, M., Bonato, M., Demirer, R. & Gupta, R. (2018). Geopolitical risks and stock market Dynamics of the BRICS. Economic Systems, 42, 295-306.
• Caldara, D. ve Iacoviello, M. (2022). Measuring Geopolitical Risk. American Economic Review, 112(4), 1194-1225.
• Chien, M. S. & Setyowati, N. (2020). The effects of uncertainty shocks on global housing markets. International Journal of Housing Markets and Analysis, 14(1), 218-242.
• Data downloaded from https://www.matteoiacoviello.com/gpr.htm on June 29, 2022.
• Han, H., Linton, O., Oka, T. & Whang, Y.J. (2016). The cross-quantilogram: Measuring quantile dependence and testing directional predictability between time series. Journal of Econometrics, 193(1), 251-270.
• Hülagü, T., Kızılkaya, E., Özbekler, A.G. & Tunar, P. (2016). Türkiye Konut Fiyat Endeksi’nin Kalite Değişimi Etkisinden Arındırılması: Hedonik Konut Fiyat Endeksi, Ekonomi Notları No. 16/02.
• Linton, O. & Whang, Y.J. (2007). The quantilogram: With an application to evaluating directional predictability. Journal of Econometrics, 141(1), 250-282.
• Lobato, I. N. (2001). Testing That a Dependent Process Is Uncorrelated. Journal of the American Statistical Association, 96(455), 1066-1076.
• Politis, D.N. & Romano, J.P. (1994). The Stationary Bootstrap. Journal of the American Statistical Association, 89(428), 1303-1313.
• T.C.M.B. (2022). Konut Fiyat Endeksi. https://www.tcmb.gov.tr/wps/wcm/connect/b4628fa9-11a7-4426-aee6-dae67fc56200/KFE- Metaveri.pdf?MOD=AJPERES&CACHEID=ROOTWORKSPACE-b4628fa9-11a7-4426-aee6-dae67fc56200-n-ivv0n (accessed July 11, 2022).