Step Interventions and Market Integration: Tests in the Us, UK and Australian Property Markets

Posted: 8 Oct 1996

See all articles by Patrick J. Wilson

Patrick J. Wilson

University of Technology Sydney (UTS) - School of Finance and Economics

John Okunev

Bond University Business School

James R. Webb

Cleveland State University

Date Written: Undated

Abstract

Market integration implies the existence of some long run equilibrium relationship between/amongst markets in such a way that the movements in one market are transmitted to movements in the other/s. It is an interesting observation of much of the literature regarding a possible relationship between real estate and stock markets that there is relatively scant attention given to the possible existence of structural breaks and the impact that such breaks may have on tests for market integration. In this paper we examine the issue of whether the stock markets and real estate markets are stationary or nonstationary in the presence of structural breaks. We adopt the techniques of Perron (1989), Zivot and Andrews (1992) and Perron and Vogelsang (1992). The Zivot- Andrews and Perron-Vogelsang techniques supported market segmentation by showing that the relevant series were integrated to different orders at varying breakpoints (hence implying that the series could not be cointegrated). The results also support the notion that property and equity markets are not integrated internationally. These outcomes, therefore, suggest that there may be risk reduction benefits to be derived from diversification across property and equity markets both domestically and internationally.

JEL Classification: R31

Suggested Citation

Wilson, Patrick J. and Okunev, John and Webb, James R., Step Interventions and Market Integration: Tests in the Us, UK and Australian Property Markets (Undated ). Available at SSRN: https://ssrn.com/abstract=9160

Patrick J. Wilson (Contact Author)

University of Technology Sydney (UTS) - School of Finance and Economics ( email )

Haymarket
Sydney, NSW 2007
Australia
61 2 9514 7777 (Phone)
61 2 9514 7711 (Fax)

John Okunev

Bond University Business School ( email )

Gold Coast
Australia

James R. Webb

Cleveland State University ( email )

1860 E. 18th St., BU 327E
Cleveland, OH 44115
United States
216-687-4716 (Phone)
216-687-4716 (Fax)

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