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Information and volatility linkages between real estate, equity, bond and money markets in Australia

Information and volatility linkages between real estate, equity, bond and money markets in Australia The purpose of this paper is to examine information and volatility linkages among real estate, equity, bond and money markets in Australia.Design/methodology/approachA novel rational expectations framework of financial contagion (Kodres and Pritsker, 2002), along with a combination of robust statistical methods including simple and dynamic correlations and generalized impulse response (Fereidouni et al., 2014) have been employed using data covering three dynamic pre-pandemic economic cycles, namely, global financial crisis (GFC) period, pre-pandemic housing boom and pre-pandemic housing downturn from 2008 (February) to 2019 (December).FindingsResults reveal information linkages across real estate, equity, bond and money markets through correlations in return and volatilities of these series. Finding indicates that the three financial markets (equity, bond and money markets) are interdependent and integrated through information and volatility linkages during the GFC period and pre-pandemic housing downturn period. Financial markets have stronger associations with real estate market during pre-pandemic housing boom. The findings contribute to the general notion that the performances of three financial markets are closely related to the “boom” phase of the real estate cycle.Originality/valueThis research provides an extension of existing literature regarding the information and volatility contagion of the expanded set of core investment markets in Australia. The findings could assist household buyers and investors in designing strategic investment portfolios/hedging strategies and minimizing asset specific risks through diversification over short-term and long-term. In addition, results could support the maintenance, growth and development of a combination of competitive balanced investment markets including real estate, equity, bond and money markets in post-pandemic economy. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Housing Markets and Analysis Emerald Publishing

Information and volatility linkages between real estate, equity, bond and money markets in Australia

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References (61)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1753-8270
eISSN
1753-8270
DOI
10.1108/ijhma-01-2022-0006
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to examine information and volatility linkages among real estate, equity, bond and money markets in Australia.Design/methodology/approachA novel rational expectations framework of financial contagion (Kodres and Pritsker, 2002), along with a combination of robust statistical methods including simple and dynamic correlations and generalized impulse response (Fereidouni et al., 2014) have been employed using data covering three dynamic pre-pandemic economic cycles, namely, global financial crisis (GFC) period, pre-pandemic housing boom and pre-pandemic housing downturn from 2008 (February) to 2019 (December).FindingsResults reveal information linkages across real estate, equity, bond and money markets through correlations in return and volatilities of these series. Finding indicates that the three financial markets (equity, bond and money markets) are interdependent and integrated through information and volatility linkages during the GFC period and pre-pandemic housing downturn period. Financial markets have stronger associations with real estate market during pre-pandemic housing boom. The findings contribute to the general notion that the performances of three financial markets are closely related to the “boom” phase of the real estate cycle.Originality/valueThis research provides an extension of existing literature regarding the information and volatility contagion of the expanded set of core investment markets in Australia. The findings could assist household buyers and investors in designing strategic investment portfolios/hedging strategies and minimizing asset specific risks through diversification over short-term and long-term. In addition, results could support the maintenance, growth and development of a combination of competitive balanced investment markets including real estate, equity, bond and money markets in post-pandemic economy.

Journal

International Journal of Housing Markets and AnalysisEmerald Publishing

Published: Feb 28, 2023

Keywords: Information linkages; Volatility linkages; Rational expectation; Real estate; Equity; Bond; Money markets; Australia

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