Real Estate's Information and Volatility Links with Stock, Bond and Money Markets

27 Pages Posted: 23 Oct 2018

See all articles by Lin Mi

Lin Mi

University of Queensland

Allan Hodgson

University of Queensland - Faculty of Business, Economics and Law; Financial Research Network (FIRN)

Date Written: November 2018

Abstract

We examine real estate's information and volatility linkages with stock, bond and money markets. Based on the theory that the volatility of prices directly reflects of the rate at which information flows to the market (Kyle, [Kyle, A. S., 1985]; Ross, [Ross, S. A., 1989]), we propose that information linkages across markets are revealed in the correlations of their volatilities, rather than correlations of returns. Applying an implied volatility correlation approach and the Generalized Method of Moments (GMM) estimation of Fleming et al. ([Fleming, J., 1998]) stochastic volatility model, we find strong information and volatility linkages across the four markets.

Keywords: Real Estate Investment Trusts, Information linkage, Volatility linkage, Implied volatility, Stochastic volatility

Suggested Citation

Mi, Lin and Hodgson, Allan C., Real Estate's Information and Volatility Links with Stock, Bond and Money Markets (November 2018). Accounting & Finance, Vol. 58, pp. 465-491, 2018, Available at SSRN: https://ssrn.com/abstract=3271219 or http://dx.doi.org/10.1111/acfi.12375

Lin Mi (Contact Author)

University of Queensland

St Lucia
Brisbane, Queensland 4072
Australia

Allan C. Hodgson

University of Queensland - Faculty of Business, Economics and Law ( email )

4072 Brisbane, Queensland
Australia

Financial Research Network (FIRN)

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

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