Lead-Lag Relationship between the Real Estate Spot and Forward Contract Markets

Posted: 15 Sep 2008

See all articles by Edward Chung Yim Yiu

Edward Chung Yim Yiu

University of Auckland Business School

Siu Kei Wong

University of Hong Kong

Date Written: September 11, 2008

Abstract

This study analyzes the lead-lag relationship between the spot and forward returns on direct real estate investments. Based on the forward price index (for which the term to maturity is zero) and the expost spot price index of residential property in Hong Kong, changes in information flow between the spot and forward markets are tested to see how they affect the lead-lag relationship. The findings suggest that (1) during periods of low-volume ratios (i.e., the forward market is relatively less active than the spot market), the spot return Granger causes the returns of forward contracts; and (2) during periods of higher-volume ratios, there are feedback relationships between the two markets.

Keywords: forward contracts, repeat sales price index, lead-lag relationship, volume ratio, liquidity

JEL Classification: G13

Suggested Citation

Yiu, Edward Chung Yim and Wong, Siu Kei, Lead-Lag Relationship between the Real Estate Spot and Forward Contract Markets (September 11, 2008). Journal of Real Estate Portfolio Management, Vol. 11, No. 3, 2005, Available at SSRN: https://ssrn.com/abstract=1267036

Edward Chung Yim Yiu (Contact Author)

University of Auckland Business School ( email )

Sir Owen G Glenn Building
12 Grafton Road
Auckland, 1024
New Zealand
+64 923 3913 (Phone)

HOME PAGE: http://https://unidirectory.auckland.ac.nz/people/profile/edward-yiu

Siu Kei Wong

University of Hong Kong ( email )

Pokfulam Road
Hong Kong, HK
China

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