Spatial Linkages in Returns and Volatilities among U.S. Regional Housing Markets |
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| Authors: | Bing Zhu Roland Füss Nico B Rottke |
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| Institution: | 1. Department of Real Estate Finance, University of Regensburg, 93053 Regensburg, Germany or Bing.Zhu@wiwi.uni‐regensburg.de.;2. Department of Finance, Accounting & Real Estate, EBS Business School, 65189 Wiesbaden, Germany, and Caledonian Business School, Glasgow Caledonian University, U.K., and Centre for European Economic Research (ZEW), Mannheim, Germany or roland.fuess@ebs.edu.;3. EBS Universit?t für Wirtschaft und Recht, 65189 Wiesbaden, Germany or nico.rottke@ebs.edu. |
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| Abstract: | This article investigates spatial linkages in returns, idiosyncratic risks and volatilities across 19 U.S. regional housing markets. Using Case & Shiller housing price indices from 1995 through 2009, we find that interconnections across markets can be “wider” and “stronger” than would normally be expected. They are “wider” because, in addition to geographic closeness, economic proximity is also an important source of influence; they are “stronger” because of the significant contagion effects during the 2007–2009 subprime and financial crises. The increased comovement and interdependence, especially among more geographically diverse regions with similar economic conditions, may help explain the failure of geographic portfolio diversification strategies. |
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