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Quantile causality between banking stock and real estate securities returns in the US

Author

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  • Albulescu, C.T.
  • Bouri, E.
  • Tiwari, A.K.
  • Roubaud, D.

Abstract

Unlike most prior studies examining the causal relationship between the overall stock market and real estate securities, this study investigates the causal relationship between banking and real estate sectors in the US within a quantile causality framework by using daily data from August 31, 2006, to September 9, 2016. The non-linearity tests we use indicate the suitability of the quantile causality approach, as it uncovers causal effects at tail quantiles that are much different from those at middle quantiles and at the mean. In fact, the findings reveal bi-directional causality that derives from only lower and upper levels of quantiles, suggesting that the returns in each of the markets under study can be used to predict the returns of the other market in bullish and bearish conditions, and not under normal conditions. Accordingly, investors should be cautious in hedging the risk across these markets when they are extremely unstable.

Suggested Citation

  • Albulescu, C.T. & Bouri, E. & Tiwari, A.K. & Roubaud, D., 2020. "Quantile causality between banking stock and real estate securities returns in the US," The Quarterly Review of Economics and Finance, Elsevier, vol. 78(C), pages 251-260.
    • Handle: RePEc:eee:quaeco:v:78:y:2020:i:c:p:251-260
    DOI: 10.1016/j.qref.2020.03.005
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    More about this item

    Keywords

    Banking stocks; Real estate securities; US stock market; Quantile causality;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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