Volatility Decomposition and Correlation in International Securitized Real Estate Markets

Posted: 12 Nov 2009

See all articles by Kim Hiang Liow

Kim Hiang Liow

National University of Singapore (NUS) - Department of Real Estate

Muhammad Ibrahim

National University of Singapore (NUS)

Date Written: November 11, 2009

Abstract

This study contributes to the literature in international securitized real estate market volatility in three ways. Each market's conditional volatility is decomposed into a "permanent" or long-run component and a "transitory" or short-run component via a Component-GARCH model. Even though with the same number of common factors derived from the "permanent" and "transitory" volatility series, their loadings are not similar and consequently the long-run and short-run volatility linkages for some markets are different. Finally there are significant volatility co-movements between real estate and stock markets' "permanent" and "transitory" components between real estate and stock markets' "permanent" and "transitory" components suggesting that real estate markets are at least not segmented from stock markets in international investing.

Keywords: permanent volatility, transitory volatility, Component-GARCH model, correlation, securitized real estate markets

Suggested Citation

Liow, Kim Hiang and Ibrahim, Muhammad, Volatility Decomposition and Correlation in International Securitized Real Estate Markets (November 11, 2009). Journal of Real Estate Finance and Economics, Vol. 40, No. 2, 2010. Available at SSRN: https://ssrn.com/abstract=1504184

Kim Hiang Liow (Contact Author)

National University of Singapore (NUS) - Department of Real Estate ( email )

4 Architecture Drive
Singapore 117566
Singapore
65-8743420 (Phone)
65-7748684 (Fax)

Muhammad Ibrahim

National University of Singapore (NUS) ( email )

Bukit Timah Road 469 G
Singapore, 117591
Singapore

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