Exogeneous shocks, risk, and market convergence of real alternative and financial assets: evidence from nonlinear dynamics

Benoît Faye, Eric Fur and Stéphanie Prat ()
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Benoît Faye: LAREFI University of Bordeaux
Eric Fur: LAREFI University of Bordeaux
Stéphanie Prat: LAREFI University of Bordeaux

Annals of Operations Research, 2024, vol. 334, issue 1, No 19, 497-520

Abstract: Abstract This article investigates the dynamic process of convergence among a set of real alternative (art, fine wine, gold, residential real estate) and financial assets in the US context over the period 2003–2019. The objective is to explore the time-varying behavior of their links considering structural breaks coming from exogenous economic and financial shocks that prevent market convergence from being a linear process. Using a procedure that determines endogenously multiple structural breaks and a rolling co-integration framework, we show that price co-movements depend on the global financial and economic environments. Our results confirm the existence of a long-term co-integration relationship among price series but with structural breaks. We find that exogenous shocks lead to a lower degree of convergence of real alternative and conventional assets, and expansion phases promote market convergence between them. Our results contribute to guiding investors in their efforts to diversify their wealth and portfolio.

Keywords: Real alternative assets, Art, Fine wine, Gold, Residential real estate; Price co-movements; Rolling cointegration (search for similar items in EconPapers)
JEL-codes: C32 G11 G12 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10479-021-04510-5

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