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Cyclical co-movements of private real estate, public real estate and equity markets: a cross-continental spectrum

Devaney, Steven; Xiao, Qin

Authors

Steven Devaney

Abstract

Whether returns from investing in real estate shares reflect equity market or real estate market trends is an important question for investors seeking liquid, low cost exposure to real estate. We consider the relationship between real estate shares, private real estate investments and equity markets for five locations: Australia, Hong Kong, Singapore, UK and US. We utilise spectral and cross-spectral techniques to decompose each time series into cyclical components of differing frequencies. This allows correlations for a range of cyclical components to be analysed. Our results suggest that returns from real estate shares share a number of short frequency cycles with the equity market. Longer cycles are evident in both real estate shares and private real estate returns, but these cycles are not always shared. Hence, real estate shares and private real estate may not always be close substitutes, even over longer horizons, but the relationship varies across our locations.

Journal Article Type Article
Publication Date 2017-12
Journal Journal of multinational financial management
Print ISSN 1042-444X
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 42-43
Pages 132-151
Institution Citation Devaney, S., & Xiao, Q. (2017). Cyclical co-movements of private real estate, public real estate and equity markets: a cross-continental spectrum. Journal of Multinational Financial Management, 42-43, 132-151. doi:10.1016/j.mulfin.2017.10.002
DOI https://doi.org/10.1016/j.mulfin.2017.10.002
Keywords Real estate; Spectral analysis; Transaction indices; Disaggregated data
Publisher URL http://www.sciencedirect.com/science/article/pii/S1042444X17301871
Additional Information This is the accepted manuscript of an article published in Journal of multinational financial management, 2017. The version of record is available at the DOI link in this record.