Co-Movements and Systematic Risk of Asian Securitized Real Estate Markets: A Wavelet Analysis
32 Pages Posted: 22 May 2017
Date Written: May 21, 2017
This study expands the wavelet literature by using the continuous wavelet transform based measure to examine the interdependence and systematic risk of nine Asian securitized real estate markets: Australia, China, Hong Kong, Japan, Malaysia, Philippines, Singapore, Thailand, Taiwan) and the US market, from January 12, 1995 through Jun 23, 2016. The empirical results indicate that both the co-movement relationship and sector’s systematic risk are time-varying and heterogeneous at different scales. We find that diversification opportunities among the real estate markets are diminishing during the two major crises, as scale increases. Moreover, the systematic risk (beta) coefficients of the real estate markets increase during the global financial crisis period and become more stable at lower frequencies. Finally, local stock market returns provide a better proxy of market portfolio for the domestic real estate markets than global stock returns. Our results highlight the importance of considering both time and scale-varying features in co-movement relationship and systematic risk assessment in Asian securitized real estate markets.
Keywords: Co-movement, systematic risk, wavelets, local stock market, global stock markets, securitized real estate markets
JEL Classification: C58, F65, G15, R30
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