Contagion between real estate and financial markets: A Bayesian quantile-on-quantile approach

Massimiliano Caporin, Rangan Gupta and Francesco Ravazzolo

The North American Journal of Economics and Finance, 2021, vol. 55, issue C

Abstract: We study contagion between Real Estate Investment Trusts (REITs) and the equity market in the U.S. over four sub-samples covering January, 2003 to December, 2017, by using Bayesian nonparametric quantile-on-quantile (QQ) regressions with heteroskedasticity. We find that the spillovers from the REITs on to the equity market has varied over time and quantiles defining the states of these two markets across the four sub-samples, thus providing evidence of shift-contagion. Further, contagion from REITs upon the stock market went up during the global financial crisis particularly, and also over the period corresponding to the European sovereign debt crisis, relative to the pre-crisis period. Our main findings are robust to alternative model specifications of the benchmark Bayesian QQ model, especially when we control for omitted variable bias using the heteroskedastic error structure. Our results have important implications for various agents in the economy namely, academics, investors and policymakers.

Keywords: Contagion; Real estate market; Stock market; Quantile-on-quantile model; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: C22 G10 R30 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062940820302291
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Contagion between Real Estate and Financial Markets: A Bayesian Quantile-on-Quantile Approach (2019)
Working Paper: Contagion between Real Estate and Financial Markets: A Bayesian Quantile-on-Quantile Approach (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:55:y:2021:i:c:s1062940820302291

DOI: 10.1016/j.najef.2020.101347

Access Statistics for this article

The North American Journal of Economics and Finance is currently edited by Hamid Beladi

More articles in The North American Journal of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().