Exploring the dynamic relationship between housing and retail property markets: an empirical study of Hong Kong

Eddie C.M. Hui and Xian Zheng

Journal of Property Research, 2012, vol. 29, issue 2, 85-102

Abstract: This paper investigates the dynamic conditional correlations (DCCs) between housing returns and retail property returns, and the existence of volatility spillover between the two property markets of Hong Kong. Two multivariate stochastic volatility models (MSV), namely Granger causality MSV and DCC-MSV model, are used to capture the time-varying correlations and the volatility spillover effect, respectively. The findings show that the correlations between housing returns and retail property returns follow a dynamic process, and such dynamic correlation could serve as a leading indicator for future property price movements. Besides, the findings also suggest that Hong Kong’s retail property market is generally more volatile than its residential market. Additionally, we find a unilateral volatility spillover from residential property to retail property in the Hong Kong market.

Date: 2012
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DOI: 10.1080/09599916.2012.674968

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