Volatility Transmission: A Global Tri-Variate Analysis of Public Real Estate and Foreign Exchange Markets

Simon Stevenson

ERES from European Real Estate Society (ERES)

Abstract: A large number of papers have examined various aspects concerning the volatility of the public real estate sector. Whilst this literature initially tended to concentrate on the volatility dynamics of single-domestic markets (e.g. Stevenson, 2002; Cotter & Stevenson, 2006, 2008; Liow, 2009; Liow & Ibrahim, 2010) it has increasingly examined the international issues. This strand of research is also tied in with those papers to have considered spillovers and contagion affects in returns (Michayluk et al., 2006; Liow et al., 2011; Hoesli & Reka 2011; Yang et al., 2012; Zhou 2011). Two recent papers (Liow, 2012, Stevenson, 2013), in turn extend this literature to consider the drivers of integration across international securitised real estate markets. This study further extends the above cited pieces of research to more fully account for the impact of exchange rates. It analyses the volatility transmission between the public real estate and foreign exchange markets. This is undertaken using a trivariate specification of the Baba, Engle, Kraft and Kroner-generalised autoregressive conditional heteroscedasticity (BEKK-GARCH) model. The analysis extends from 1990 through 2014 and the results highlight the importance of factoring in fully the currency markets into any analysis of international investment.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2015-07-01
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