Asymmetric Volatility, Correlation and Returns Dynamics between the U.S. And U.K. Securitized Real Estate Markets

23 Pages Posted: 19 Nov 2006

See all articles by David Michayluk

David Michayluk

University of Technology Sydney (UTS) - School of Finance and Economics; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR)

Patrick J. Wilson

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

Ralf Zurbruegg

University of Adelaide; Financial Research Network (FIRN)

Abstract

We construct synchronously priced indices of securitized property listed on the New York Stock Exchange and London Stock Exchange. The indices are then utilized to examine dynamic information flows between the two markets. By analyzing returns behavior, asymmetric volatility spillover effects and exceedance correlations, this study shows that the real estate markets in these two countries experience significant interaction on a daily basis when synchronously priced data are utilized. These results are different from when close-to-close returns are examined, implying that the use of close-to-close data can misconstrue the true dynamics that exist between these markets. Results also show significant asymmetric effects on both the volatility and correlation dynamics between the markets. This has several implications for property portfolio managers, indicating that positive and negative news impact the markets differently. This is particularly true for the United Kindom, where daily foreign news from the United States can influence U.K. volatility.

Suggested Citation

Michayluk, David and Wilson, Patrick J. and Zurbruegg, Ralf, Asymmetric Volatility, Correlation and Returns Dynamics between the U.S. And U.K. Securitized Real Estate Markets. Real Estate Economics, Vol. 34, No. 1, pp. 109-131, Spring 2006, Available at SSRN: https://ssrn.com/abstract=945531 or http://dx.doi.org/10.1111/j.1540-6229.2006.00161.x

David Michayluk (Contact Author)

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

Finance Discipline Group
UTS Business
Sydney, NSW 2007
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Patrick J. Wilson

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)

Ralf Zurbruegg

University of Adelaide ( email )

233 North Terrace
Department of Finance
Adelaide SA 5005
Australia
+61 8 8303 5535 (Phone)
+61 8 8303 4368 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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