Regime Changes and Dynamic Linkages in Major Securitized Real Estate Markets
38 Pages Posted: 26 Jul 2007
Date Written: July 25, 2007
This paper is a contribution to the literature in international real estate market volatility dynamics and linkages from an alternative perspective. We analyzes the dynamics and transmission of conditional volatilities with multiple structural changes in mean returns and volatility using the Bai and Perron (2003) methodology, across five major securitized real estate markets, employing a multivariate regime-dependent asymmetric dynamic covariance model (MRDADC) that allows the conditional matrix to be both time- and state-varying. Important contributions of this study are the findings of statistically significant variables that represent the multiple regime changes. When taken into consideration, they influence the return-volatility transmission across markets as well as time-varying asymmetric variances and covariance dynamics in our MRDADC representation.
Keywords: securitized real estate markets, multiple structural breaks, volatility regimes, multivariate regime-dependent asymmetric dynamic covariance model
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