Cycles and common cycles in real estate markets

Kim Liow

International Journal of Managerial Finance, 2007, vol. 3, issue 3, 287-305

Abstract: Purpose - The paper seeks to examine cycles and common cycles in the real estate markets of the UK, Japan, Singapore, Hong Kong and Malaysia using a combination of time domain and frequency domain methods. Design/methodology/approach - The paper identifies the patterns of cyclical movement (if any) in the five public real estate markets, and searches for common cycle characteristics and patterns in international real estate markets. In addition to the time domain analyses, these empirical investigations are further empowered by a frequency domain method that includes spectral and co‐spectral analyses. Findings - International real estate markets are characterized by cyclical behavior that exhibits phenomenal fluctuations. The markets are also pro‐cyclical; they do tend to move together. Furthermore, some differences in the patterns of the common cycles and their lead‐lag linkages are evident. Research limitations/implications - International investors would probably benefit from diversifying real estate stocks across the UK and Asian real estate markets, especially in the short and medium terms. However, the long‐term cyclical patterns across the national real estate stock markets are not sharply different, indicating that smaller diversification benefits are to be expected in the long term. Originality/value - Common cycle analysis advances investors' understanding of the long‐term relationship and medium‐ and short‐term linkages across international real estate markets, thereby allowing investors and portfolio managers an opportunity to discern any contrasting cyclical patterns at all frequencies so as to assist in their portfolio decisions.

Keywords: Real estate; Business cycles; Diversification (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:v:3:y:2007:i:3:p:287-305

DOI: 10.1108/17439130710756925

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