 Understanding the relationship between public and private commercial real estate marketsJournal of Property Research, 2020, vol. 37, issue 4, 289-307 Abstract: This paper provides a modelling framework to examine the very low correlation at short horizons and high correlation at long horizons between private and public commercial real estate returns. For this purpose, we use a correlated, unobserved component model with a common trend and Markov-switching heteroskedasticity. This model decomposes the public and private commercial real estate prices into a common trend and interdependent cycles. The proposed model is able to endogenously capture low and high volatility regimes in real estate markets. More importantly, our model shows that the low correlation observed at short horizons between the public and private real estate markets is mainly due to the absence of any correlation in low-volatility regimes. On the other hand, the cycles, or short-run movements, in these two markets are highly correlated in high-volatility regimes. Date: 2020 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:jpropr:v:37:y:2020:i:4:p:289-307 Ordering information: This journal article can be ordered from DOI: 10.1080/09599916.2020.1794936 Access Statistics for this article Journal of Property Research is currently edited by Bryan MacGregor More articles in Journal of Property Research from Taylor & Francis Journals |
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