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A range-based volatility approach to measuring volatility contagion in securitized real estate markets

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  • Anderson, Randy I.
  • Chen, Yi-Chi
  • Wang, Li-Min

Abstract

We use a newly-developed time-varying range-based volatility model to capture the dynamics of securitized real estate volatility. The novelty of the model is the use of a smooth transition copula function to capture the nonlinear comovements between major REIT markets in the presence of structural changes. We then investigate the impact of extreme events on the volatility dependence in a broad set of 13 developed countries over the period from 1990 to 2012. We find that information transmission through the volatility channel can exhibit either bi- or uni-directional causality. In addition, financial contagion following the subprime crisis is found between the U.S. and Australia.

Suggested Citation

  • Anderson, Randy I. & Chen, Yi-Chi & Wang, Li-Min, 2015. "A range-based volatility approach to measuring volatility contagion in securitized real estate markets," Economic Modelling, Elsevier, vol. 45(C), pages 223-235.
    • Handle: RePEc:eee:ecmode:v:45:y:2015:i:c:p:223-235
    DOI: 10.1016/j.econmod.2014.10.058
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    2. Mpoha, Salifya & Bonga-Bonga, Lumengo, 2021. "Spillover effects from China and the US to global emerging markets: a dynamic analysis," MPRA Paper 109349, University Library of Munich, Germany.
    3. Del Brio, Esther B. & Mora-Valencia, Andrés & Perote, Javier, 2017. "The kidnapping of Europe: High-order moments' transmission between developed and emerging markets," Emerging Markets Review, Elsevier, vol. 31(C), pages 96-115.
    4. Liu, Jian & Chen, Yan & Liao, Shufei & Cheng, Cheng & Fu, Yongge, 2023. "Information spillovers in Hong Kong REITs and related asset markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 92(C), pages 215-229.
    5. Wu, Xinyu & Hou, Xinmeng, 2020. "Forecasting volatility with component conditional autoregressive range model," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    6. Xie, Haibin & Wu, Xinyu, 2017. "A conditional autoregressive range model with gamma distribution for financial volatility modelling," Economic Modelling, Elsevier, vol. 64(C), pages 349-356.
    7. Auer, Benjamin R., 2016. "How does Germany's green energy policy affect electricity market volatility? An application of conditional autoregressive range models," Energy Policy, Elsevier, vol. 98(C), pages 621-628.
    8. Imen Bedoui-Belghith & Slaheddine Hallara & Faouzi Jilani, 2023. "Crisis transmission degree measurement under crisis propagation model," SN Business & Economics, Springer, vol. 3(1), pages 1-27, January.
    9. Wu, Xinyu & Xie, Haibin & Zhang, Huanming, 2022. "Time-varying risk aversion and renminbi exchange rate volatility: Evidence from CARR-MIDAS model," The North American Journal of Economics and Finance, Elsevier, vol. 61(C).
    10. Keagile Lesame & Elie Bouri & David Gabauer & Rangan Gupta, 2021. "On the Dynamics of International Real Estate Investment Trust Propagation Mechanisms: Evidence from Time-Varying Return and Volatility Connectedness Measures," Working Papers 202152, University of Pretoria, Department of Economics.
    11. Chlibi Souhir & Jawadi Fredj & Sellami Mohamed, 2017. "Modeling threshold effects in stock price co-movements: a vector nonlinear cointegration approach," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 21(1), pages 47-63, February.

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