Price and volatility dynamics between securitized real estate spot and futures markets

Jing Shi and Tracy Xu

Economic Modelling, 2013, vol. 35, issue C, 582-592

Abstract: This study is among the first to examine the price, volatility and covariance dynamics between securitized real estate spot and futures markets. It provides a distinctive and yet complementary perspective on the predictability of real estate spot return and spot volatility based on the information from the spot market alone. The results show that for the EPRA/NAREIT Europe index, the spot market tends to lead its futures market in the long run during the sample period, which can be attributed to a rather illiquid real estate futures market in sharp contrast with a voluminous spot market. Furthermore, we find the V-shaped asymmetric effect of the basis on the futures market volatility, which represents the primary channel of strong volatility transmission between securitized real estate spot and futures markets during the whole sample and the post-crisis period. This sheds light on the hedging effectiveness for the REIT index.

Keywords: Real estate futures; Asymmetric effect; Basis; Multivariate GARCH; Recursive cointegration analysis (search for similar items in EconPapers)
JEL-codes: C32 G13 G14 R33 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:35:y:2013:i:c:p:582-592

DOI: 10.1016/j.econmod.2013.08.003

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