Increased Tail Dependence in Global Public Real Estate Markets

24 Pages Posted: 2 May 2018

See all articles by Yang Deng

Yang Deng

Sun Yat-Sen University (SYSU) - Lingnan (University) College

Helen X. H. Bao

University of Cambridge - Department of Land Economy

Pu Gong

Huazhong University of Science and Technology (Formerly Tongi Medical University)

Date Written: April 1, 2018

Abstract

This study examines the tail dependence of returns in international public real estate markets. By using daily returns of real estate securities in seven countries from 2000 to 2014, we analyze how the interdependence of international securitized real estate markets has changed since the Global Financial Crisis. We divide our sampling period into pre-, during, and post-crisis periods, and estimate both upper and lower tail dependence coefficients for each sub-period. Our empirical results confirm that most country pairs have changed from tail-independent to tail-dependent since 2007. Strong tail dependence persists throughout during crisis and post-crisis periods. The findings from the post-crisis sub-sample provide new evidences on increased tail dependence in global real estate market in recent years. We conclude that international real estate securities still offer diversification benefits nowadays but to a lesser extent than in the pre-crisis period. Investing in global real estate securities markets is beneficial for cross-region, mixed-asset portfolios.

Keywords: tail dependence, real estate investment trust, mixed-assets, real estate, copula

JEL Classification: G11, G15

Suggested Citation

Deng, Yang and Bao, Helen X. H. and Gong, Pu, Increased Tail Dependence in Global Public Real Estate Markets (April 1, 2018). Available at SSRN: https://ssrn.com/abstract=3162813 or http://dx.doi.org/10.2139/ssrn.3162813

Yang Deng

Sun Yat-Sen University (SYSU) - Lingnan (University) College ( email )

Guangzhou
China

Helen X. H. Bao (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

Pu Gong

Huazhong University of Science and Technology (Formerly Tongi Medical University) ( email )

1037 Luoyu Rd
Wuhan
China

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