Dynamic interdependence between the US and the securitized real estate markets of the Asian-Pacific economies

Abstract

Purpose

The purpose of this paper is to revisit the dynamic linkages between the US and the national securitized real estate markets of each of the nine Asian-Pacific (APAC) economies in time-frequency domain.

Design/methodology/approach

Wavelet decomposition via multi-resolution analysis is employed as an empirical methodology to consider time-scale issue in studying the dynamic changes of the US–APAC cross-real estate interdependence.

Findings

The strength and direction of return correlation, return exogeneity, shock impulse response, market connectivity and causality interactions change when specific time-scales are involved. The US market correlates with the APAC markets weakly or moderately in the three investment horizons with increasing strength of lead-lag interdependence in the long-run. Moreover, there are shifts in the net total directional volatility connectivity effects at the five scales among the markets.

Research limitations/implications

Given the focus of the five approaches and associated indicators, the picture that emerges from the empirical results may not completely uniform. However, long-term investors and financial institutions should evaluate the time-scale based dynamics to derive a well-informed portfolio decision.

Practical implications

Future research is needed to ascertain whether the time-frequency findings can be generalizable to the regional and global context. Additional studies are required to identify the factors that contribute to the changes in the global and regional connectivity across the markets over the three investment horizons.

Originality/value

This study has successfully decomposed the various market linkage indicators into scale-dependent sub-components. As such, market integration in the Asia-Pacific real estate markets is a “multi-scale” phenomenon.

Citation

Liow, K., Zhou, X., Li, Q. and Huang, Y. (2019), "Dynamic interdependence between the US and the securitized real estate markets of the Asian-Pacific economies", Journal of Property Investment & Finance, Vol. 37 No. 1, pp. 92-117. https://doi.org/10.1108/JPIF-07-2018-0048