Continental Shift? An Analysis of Convergence Trends in European Real Estate Equities

Abstract

This study investigates the effects of European monetary integration on the behavior of stock returns in European real estate companies from the perspective of a dollar-denominated investor. A range of statistical tests is applied to assess changes in segmentation, co-movement and causality. The results suggest that, relative to the wider equity markets, the dispersion of performance is higher, correlations are lower and a common contemporaneous factor has much lower explanatory power whilst lead-lag relationships are stronger. Less and slower integration is attributed to the relatively small size of the real estate securities market and the local nature of many real estate companies' portfolios.

Keywords: European, monetary integration, stock returns, real estate companies

JEL Classification: L85, R21, R31, E22, E31, E42-47, E51-53, F30-39