On the real estate market efficiency

This reseach reexamines the efficiency hypothesis of the real estate market using monthly data and the vector autoregressive (VAR) modelling technique. The tests focus on the causal linkage between real estate returns and a number of relevant financial and economic variables. An eight-by-eight VAR model is estimated using the FPE and the specific gravity criteria, in conjunction with an extensive series of specification tests. The empirical results distilled from system estimations suggest that the real estate market is efficient with respect to available information on the industrial production, the risk premia, the term structure of interest rates, and the monetary base. Movements in these variables are quickly and fully utilized by market agents, perhaps owing to the intensity with which their relationship with stock returns has been discussed in the literature and the popular media. However, the results also suggest the presence of a significant lagged relationship between real estate returns and fiscal policy moves, even when the paths through other potential determinants of these returns are taken into account. Of course, our finding that the fiscal policy measure is useful in predicting stock returns does not necessarily imply that the real estate market is inefficient. At a minimum, inefficiency is revealed only if a careful analysis of the budgetary process can help design a profitable (exploitable) trading strategy.     

Empirical tests of real estate market efficiency

Recent empirical research using real estate data has supported the weak and semi-strong forms of the efficient markets hypothesis. Previous studies have not included an estimate of expected appreciation into the tests of market efficiency, thus raising a question about the reliability of the results. We first use a market model to test for market efficiency with results similar to those reported by others. We next use a dynamic multiple indicator, multiple cause (DYMIMIC) model, which extracts a vector of expected appreciation from the price data, to test market efficiency. This approach produces superior results and a stronger conclusion about the efficiency of housing markets. The results indicate limited adjustment delays which can be explained by the existence of high transactions and search costs.     

Government real estate interventions and the stock market

We study the spillover of government interventions in the real estate market to the stock market. We find that the more active mutual funds decreased ownership in equities with no short-term reversal. Furthermore, they increased ownership in the finance sector stocks without significant changes to their real estate equity holdings. The interventions affecting the riskiness of the finance sector stocks triggered a larger trading response than the ones focused on the real estate sector stocks’ cash flows. Overall, the spillover of the housing market shocks to the stock market seems to be materialized mostly through the discount rate channel.     

The predictability of real estate returns and market timing

Recent evidence suggests that all asset returns are predictable to some extent with excess returns on real estate relatively easier to forecast. This raises the issue of whether we can successfully exploit this level of predictability using various market timing strategies to realize superior performance over a buy-and-hold strategy. We find that the level of predicability associated with real estate leads to moderate success in market timing, although this is not necessarily the case for the other asset classes examined in general. Besides this, real estate stocks typically have higher trading profits and higher mean risk-adjusted excess returns when compared to small stocks as well as large stocks and bonds even though most real estate stocks are small stocks.     

Serial correlation and seasonality in the real estate market

In this article, a two-step, two-sample method and a Bayesian method are proposed to estimate the serial correlation and the seasonally of the price behavior of the residential housing market. The Bayesian method is found to be superior to the alternative two-step methods. The empirical results based on the Bayesian approach support the rejection of the random-walk hypothesis in the real estate market. Seasonality is not significant; however, there is still a clear indication that the returns associated with seasonal dummies are strongest in the second quarter, with the first quarter following closely.     

Do prices reflect market fundamentals in real estate markets?

The purpose of this article is to examine prices on land and REIT shares for possible evidence of deviations from market fundamentals, the underlying economic forces. Models of market fundamentals are developed from the intertemporal capital asset pricing model so that risk aversion and a stochastic investment opportunity set can be incorporated in the analysis. The approach in this article is to compare ex post values of actual discounted cash flows with prices and to test whether the price series are unbiased predictors of the future discounted cash flows. Several tests of the relationship are presented, and the results suggest that prices of real estate investment trusts and prices of farm land do not always reflect fundamental value.     

外资进入内地房地产市场的特点、原因及调控建议——以辽宁为例

近期,国家推出一系列宏观调控措施以促进房地产市场平稳健康发展,在全国房地产市场降温过程中,仍须关注外资进入对内地房地产市场的影响。文章以辽宁为例分析了外资进入内地房地产市场的特点、原因及相关影响,并从合理引导外资流向、发挥税收调节作用、加强外资流动监管等方面,就完善房地产领域的外资管理提出建议。     

Time-varying correlation between stock market returns and real estate returns

Direct investment in commercial or residential real estate is found to provide valuable diversification benefits for Australian investors though this is not so evident for indirect real estate investment vehicles like listed Australian real estate investment trusts (A-REIT). Further, multivariate analysis of Australian real estate and share market quarterly returns, spanning the period from the 3rd quarter 1986 to the 3rd quarter 2009, suggest that the correlation between real estate returns and share market returns is time-varying. Finally, while all of the asset class correlation coefficients increased with the Global Financial Crisis period this broad movement in asset class correlation is not evident in during the Wall Street Crash of 1987.     

德国房地产市场保持平稳的经验

金融危机前后,欧洲多个国家房地产业经历了大起大落,而德国房地产业却保持平稳发展态势,德国房地产业的成功经验值得借鉴。其较高的城市化水平使得各地房产市场发展水平均衡;发达的租赁市场辅助房价稳定;政府更多强调房地产的社会福利性质,并通过健全的法律制度安排,满足各阶层民众的不同层次住房需求。     

The integration of the real estate market and the stock market: Some preliminary evidence

The current study investigates whether the commercial real estate market is segmented from the stock market using the framework of Jorion and Schwartz (1986). Evidence is found to support the hypothesis that segmentation does exist as the result of indirect barriers such as the cost, amount, and quality of information for real estate rather than legal constraints. However, this evidence is contingent on whether real estate returns are computed with appraised values or imputed sale prices and on which market proxy is chosen.     

The investigation of the dynamic linkages between real estate market and stock market in Greece

ABSTRACT

We use quarterly data from Greece over the period 1997:1–2015:2 and investigate the dynamic linkages between the price of the real estate market and the price of the stock market focusing on two transmission mechanisms, namely the wealth and credit-price effects. The empirical analysis employs advanced methodological techniques and presents evidence supporting the existence of both the wealth effect and the credit effect in the long-run while in the short-run there is a one-way causal effect running from stock market towards house market. Results reveal asymmetric adjustment to equilibrium process and considerably stronger for positive deviations from the equilibrium.     

Real estate returns,money and fiscal deficits: Is the real estate market efficient?

This research examines the causal relationship between several financial variables and a portfolio of real estate returns using monthly data from January 1965 to December 1986. The empirical analysis is based on multivariate Granger-causality tests in conjunction with Akaike's final prediction error criterion. The results indicate that measures approximating monetary policy and market returns play an important role in causing changes in real estate returns. In particular, our findings suggest that base money and market returns have had significant lagged effects on current real estate returns.     

Risk management of real estate: The case of real estate swaps

Real estate swaps are a recent financial innovation based upon the principle of comparative advantage. A real estate swap is a useful tool for real estate risk management and for participating in real estate investment without the high costs associated with real estate. Potential economic benefits and costs associated with real estate swaps are considered and real estate swaps are compared to alternative tools for real estate risk management. The expected utility and effectiveness of risk management with a swap in a multiperiod framework are analyzed. The analysis finds that the subject property's return and its risk characteristics (as reflected in its correlation with interest rate and property index returns) delimit the risk management potential of a given swap position. Optimal swap positions are shown for various regions and property types based on historical return series, from the period between 1983 and 1992, and the parameters of the dynamic model developed.     

The effects of environmental liability on industrial real estate development

The paper explores the effects of current liability law on real estate transactions involving properties with potential environmental contamination. Sources of uncertainty and their likely impact on transactions are identified. Liability-driven market distortions are likely to be due less to legal uncertainty than to problems arising from asymmetric information and imperfect detection.     

Product market effects of IFRS adoption

Prior literature finds that International Financial Reporting Standards (IFRS) adopters enjoy lower financing costs subsequent to IFRS adoption. We predict and find that mandatory IFRS adopters exploit lower financing costs to increase market share vis-à-vis non-adopters. This effect is robust across several different model specifications in a sample capturing the universe of public and private firms in the EU, in a matched sample of public and private firms, and in a public firm sample comparing mandatory and voluntary IFRS adopters. We further find that IFRS is associated with an increase (decrease) in industry sales concentration (competition), consistent with large public firms increasing market share. In supplemental analyses, we find that mandatory adopters issue more equity and debt after IFRS adoption and that larger market share gains accrue to those mandatory IFRS adopters that issue more equity and debt after IFRS adoption. Overall, we provide evidence of unintended product market consequences of IFRS adoption.     

Butterfly effect: The US real estate market downturn and the Asian recession

We construct a comprehensive measure for the evolution of the US financial crisis by extracting the common components in the real estate market (S&P Case-Shiller composite-10 housing price index), the equity market (S&P 500 index), and the money market (M2 money multiplier). We then investigate the effects of this crisis on six Asian economies. Using the quarterly data from Q1 1991 to Q1 2010, we find that, surprisingly, the Asian equity markets are not contagious by the crisis; rather, trade contagion is the dominant transmission channel for the crisis to be transmitted to Asia. Finally, our empirical investigations suggest that monetary policy, rather fiscal policy, is a better choice for assisting Asian economies during this crisis.     

Asset market linkages: Evidence from financial, commodity and real estate assets

We use a general Markov switching model to examine the relationships between returns over three different asset classes: financial assets (US stocks and Treasury bonds), commodities (oil and gold) and real estate assets (US Case-Shiller index). We confirm the existence of two distinct regimes: a “tranquil” regime with periods of economic expansion and a “crisis” regime with periods of economic decline. The tranquil regime is characterized by lower volatility and significantly positive stock returns. During these periods, there is also evidence of a flight from quality - from gold to stocks. By contrast, the crisis regime is characterized by higher volatility and sharply negative stock returns, along with evidence of contagion between stocks, oil and real estate. Furthermore, during these periods, there is strong evidence of a flight to quality - from stocks to Treasury bonds.     

REITs,real estate,and inflation: Lessons from the gold market

This studyindirectly tests whether equity Real Estate Investment Trusts (REITs) proxy for real estate when examining real estate's inflation hedging ability. The hedging properties of gold, an underlying asset, are compared against those of gold stocks, a securitized form of the asset, and gold is shown to perform well as an inflation hedge, while gold stocks do not. This divergence between an asset and its securitized form suggests caution in drawing conclusions about real estate's ability to hedge inflation from equity REIT studies.