Time Varying Dependences Between Real Estate Crypto, Real Estate and Crypto Returns

Cathrine Nagl, Maximilian Nagl, Daniel Rösch, Wolfgang Schäfers and Julia Freybote

Journal of Real Estate Research, 2024, vol. 46, issue 4, 538-566

Abstract: In recent years, blockchain-based platforms such as Propy and Elysia have emerged that apply tokenization to commercial real estate. They issue real estate crypto coins, which represent a hybrid between real estate and cryptocurrencies. We investigate the return dependence of two real estate crypto coins on (1) the real estate market, as represented by the equity REIT market due to the availability of daily data, and (2) the cryptocurrency market to assess whether real estate crypto coins behave like real estate or cryptocurrencies. Using the time-varying optimal copula (TVOC) approach, we find that the dependence of real estate crypto coins on the real estate and cryptocurrency markets has changed over time. While real estate crypto coins primarily provided exposure to the cryptocurrency market in their early years, our results suggest that real estate crypto coins have become more similar to real estate as they matured. Our findings have portfolio implications for institutional investors, as they suggest that real estate crypto coins represent another asset class to be included in the real estate category.

Date: 2024
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DOI: 10.1080/08965803.2023.2277479

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