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Cycles and common cycles in real estate markets

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  • Kim Hiang Liow

Abstract

Purpose - The paper seeks to examine cycles and common cycles in the real estate markets of the UK, Japan, Singapore, Hong Kong and Malaysia using a combination of time domain and frequency domain methods. Design/methodology/approach - The paper identifies the patterns of cyclical movement (if any) in the five public real estate markets, and searches for common cycle characteristics and patterns in international real estate markets. In addition to the time domain analyses, these empirical investigations are further empowered by a frequency domain method that includes spectral and co‐spectral analyses. Findings - International real estate markets are characterized by cyclical behavior that exhibits phenomenal fluctuations. The markets are also pro‐cyclical; they do tend to move together. Furthermore, some differences in the patterns of the common cycles and their lead‐lag linkages are evident. Research limitations/implications - International investors would probably benefit from diversifying real estate stocks across the UK and Asian real estate markets, especially in the short and medium terms. However, the long‐term cyclical patterns across the national real estate stock markets are not sharply different, indicating that smaller diversification benefits are to be expected in the long term. Originality/value - Common cycle analysis advances investors' understanding of the long‐term relationship and medium‐ and short‐term linkages across international real estate markets, thereby allowing investors and portfolio managers an opportunity to discern any contrasting cyclical patterns at all frequencies so as to assist in their portfolio decisions.

Suggested Citation

  • Kim Hiang Liow, 2007. "Cycles and common cycles in real estate markets," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 3(3), pages 287-305, July.
  • Handle: RePEc:eme:ijmfpp:v:3:y:2007:i:3:p:287-305
    DOI: 10.1108/17439130710756925
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    References listed on IDEAS

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    1. Patrick J. Wilson & John Okunev, 1999. "Long-Term Dependencies and Long Run non-Periodic Co-Cycles: Real Estate and Stock Markets," Journal of Real Estate Research, American Real Estate Society, vol. 18(2), pages 257-278.
    2. Peijie Wang, 2003. "A Frequency Domain Analysis of Common Cycles in Property and Related Sectors," Journal of Real Estate Research, American Real Estate Society, vol. 25(3), pages 325-346.
    3. Stephen A. Pyhrr & Stephen E. Roulac & Waldo L. Born, 1999. "Real Estate Cycles and Their Strategic Implications for Investors and Portfolio Managers in the Global Economy," Journal of Real Estate Research, American Real Estate Society, vol. 18(1), pages 7-68.
    4. Witold Witkiewicz, 2002. "The Use of the HP-filter in Constructing Real Estate Cycle Indicators," Journal of Real Estate Research, American Real Estate Society, vol. 23(1/2), pages 65-88.
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    Cited by:

    1. Anupam Nanda & Jia-Huey Yeh, 2016. "International Transmission Mechanisms and Contagion in Housing Markets," The World Economy, Wiley Blackwell, vol. 39(7), pages 1005-1024, July.
    2. Patrick Krieger & Carsten Lausberg & Kristin Wellner, 2018. "Einblicke in die Gründe für nicht-normalverteilte Immobilienrenditen: eine explorative Untersuchung deutscher Wohnimmobilienportfolios [Insights into the reasons for non-normal real estate returns:," Zeitschrift für Immobilienökonomie (German Journal of Real Estate Research), Springer;Gesellschaft für Immobilienwirtschaftliche Forschung e. V., vol. 4(1), pages 49-79, November.
    3. David Gray & Caroline Elliott, 2015. "Are prices of New dwellings different? A spectral analysis of UK property vintages," Cogent Economics & Finance, Taylor & Francis Journals, vol. 3(1), pages 993860-9938, December.
    4. David Gray, 2014. "Central European foreign exchange markets: a cross-spectral analysis of the 2007 financial crisis," The European Journal of Finance, Taylor & Francis Journals, vol. 20(6), pages 550-567, June.
    5. Kim Hiang Liow & Shao Yue Angela, 2017. "Return and co-movement of major public real estate markets during global financial crisis," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 35(5), pages 489-508, August.
    6. Devaney, Steven & Xiao, Qin, 2017. "Cyclical co-movements of private real estate, public real estate and equity markets: A cross-continental spectrum," Journal of Multinational Financial Management, Elsevier, vol. 42, pages 132-151.
    7. David Gray, 2015. "Hidden Properties of Irish House Price Vintages," Housing Studies, Taylor & Francis Journals, vol. 30(8), pages 1317-1353, November.

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