A Web of Shocks: Crises Across Asian Real Estate Markets
Posted: 6 Nov 2005
The behavior of real estate markets during the 1997-1998 financial crisis in Asian economies has received little attention despite the extensive research on other asset markets over this time. This paper examines the transmission of shocks across national real estate markets prior to and during the Asian crisis using a multivariate latent factor framework. The results reveal that diversification opportunities prior to the crises are much reduced during the crisis. A comparison with regional equity markets shows that the transmission of shocks differs across the real estate and equity markets, providing evidence that investment in multiple asset classes provides some protection from large market downturns.
Keywords: Latent factor, contagion, indirect estimation, real estate
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