Volatility Spillovers, Comovements and Contagion
in Securitized Real Estate Markets
Published online: 21 September 2011
Springer Science+Business Media, LLC 2011
Abstract This paper analyzes the relationships between local and global securitized
real estate markets, but also between securitized real estate and common stock markets.
First, the volatility transmissions across markets are examined using an asymmetric
t-BEKK (Baba-Engle-Kraft-Kroner) specification of their covariance matrix. Second,
correlations from that model and tail dependences estimated using a time-varying copula
framework are analyzed to assess whether different dynamics underlie the comovements
in the whole distribution and those in the tails. Third, we investigate market contagion
by testing for structural changes in the tail dependences. We use data for the U.S., the
U.K. and Australia for the period 1990–2010 as a basis for our analyses. Spillover
effects are found to be the largest in the U.S., both domestically and internationally.
Further, comovements in tail distributions between markets appear to be quite important.
We also document different dynamics between the conditional tail dependences and
correlations. Finally, we find evidence of market contagion between the U.S. and the
U.K. markets following the subprime crisis.
Keywords Volatility spillovers
Asymmetric BEKK model
Real estate securities
JEL classification G11
J Real Estate Finan Econ (2013) 47:1–35
M. Hoesli (*)
University of Geneva (HEC and SFI), 40 boulevard du Pont-d’Arve, 1211 Geneva 4, Switzerland
University of Aberdeen (Business School), Edward Wright Building,
Aberdeen AB24 3QY Scotland, UK
Bordeaux Ecole de Management, 33405 Talence Cedex, France
University of Geneva (HEC), 40 boulevard du Pont-d’Arve, 1211 Geneva 4, Switzerland