Correlation and Volatility Dynamics in International Real Estate Securities Markets
Posted: 20 Jul 2009 Last revised: 10 Nov 2009
Date Written: July 17, 2009
We study international correlation and volatility of dynamics of publicly traded real estate securities using monthly returns from 1984 and 2006. We also examine, for comparison, the correlations among the corresponding stock markets. A multivariate dynamic conditional correlations between all real estate securities market returns than those between the stock market returns themselves. Some significant variations and structural changes in the correlation structure happened within the sample period. We detect a strong and positive connection between real estate securities market correlations and their conditional volatilities. We also find the international correlation structure of real estate securities and the broader stock market are linked to each other. Our results have economic motivations regarding the potential integration of international real estate securities markets and the possibility of including information on changing correlations and volatilities to design more optimal portfolios for international real estate securities.
Keywords: time-varying correlation, volatility, dynamic conditional correlation model, real estate securities markets, stock markets
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