Co-Movements in Global Real Estate Equity Markets: Pre/Post the Liquidity Crisis of 2007
Posted: 5 Aug 2012
Date Written: August 3, 2012
Factor analytic techniques were applied to 18 real estate equity markets using weekly FTSE EPRA/NAREIT data during the period 1997 to 2009. Our results from the exploratory factor analysis suggest three distinct factors during 1997 to 2007. With a single exception, the national returns fall neatly into three geographical areas: Asia, Europe, and North America. Interestingly, Australian returns were associated with Europe rather than the local geographical area of Asia. Results from four confirmatory factor analysis models show that the best model is the one with three pure continental factors (Asia, Europe, and North America) during the period 1997 to 2007. However, our analysis for the period 2007 to 2009 showed that there are only two factors. The Liquidity Crisis of 2007 had increased the integration of the European and North American real estate equity returns while Asian markets were less integrated with markets of other continents.
Keywords: Global real estate markets, Real estate investment trusts, Market integration/convergence, Liquidity Crisis of 2007, EPRA/NAREIT
JEL Classification: F15, F21, G15
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