Regional and Global Contagion in Real Estate Investment Trusts: The Case of the Financial Crisis of 2007-2009

20 Pages Posted: 1 Mar 2012

See all articles by George Milunovich

George Milunovich

Macquarie University - Department of Economics; Macquarie University, Macquarie Business School

Stefan Trück

Macquarie University Sydney - Department of Applied Finance and Actuarial Studies; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR); Macquarie University, Macquarie Business School

Date Written: February 15, 2012

Abstract

Using a framework similar to Bekeart, Harvey and Ng (2005), we investigate contagion between real estate investment trusts (REITs) within and across three geographical regions: North America, Europe and Asia-Pacific. We also examine for contagion between twelve national REIT markets on the one hand, and broad equity indices on the other hand. In our analysis, we distinguish between the 2007-2009 global financial crisis (GFC) period and the rest of the sample, and further test for an increase in the frequency of contagion during the GFC. We find no evidence of contagion between the REITs and equities during non-crisis sample intervals, but find contagion between six of the twelve country REIT indices and local, regional and global equity markets over the GFC period. We also report statistically significant excess correlations between the national REITs and regional and world real estate markets during the entire 2004-2011 time period, measured in addition to what is explained by a factor pricing model. Lastly, there is no evidence to suggest that the frequency of the contagion amongst the REITs increased during the crisis, and we conclude that a similar degree of dependence persisted among the national markets over the crisis and non-crisis sample periods.

Keywords: Financial Contagion, Real Estate Investment Trusts, Equity Markets, Global Financial Crisis

JEL Classification: G15, F36, C22

Suggested Citation

Milunovich, George and Trueck, Stefan, Regional and Global Contagion in Real Estate Investment Trusts: The Case of the Financial Crisis of 2007-2009 (February 15, 2012). Available at SSRN: https://ssrn.com/abstract=2005503 or http://dx.doi.org/10.2139/ssrn.2005503

George Milunovich (Contact Author)

Macquarie University - Department of Economics ( email )

Sydney NSW 2109
Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Stefan Trueck

Macquarie University Sydney - Department of Applied Finance and Actuarial Studies ( email )

North Ryde
Sydney, New South Wales 2109
Australia
61298508483 (Phone)
61298508483 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

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