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Volatility Spillover Effects in East Asian Capital Markets: A Case Study of the Real Estate Sectors

Author

Listed:
  • Esta Lestari

    (Centre for Economic Research - Indonesian Institute of Sciences (P2E-LIPI))

Abstract

A real estate market is considered as an important sector in the global economy. Real estate markets are believed to be one of the causes of the Asian financial crisis and one of the most affected sectors as well. Overheating in property prices in the Asian region led to excess volatility in real estate prices and subsequently induced the crisis. Soon after the crisis, contagion and volatility spillovers spread over the East Asian region that increased volatility and reduced returns in real estate sectors. The paper investigates whether the excess volatility in the real estate markets led to volatility spillovers to stock markets and the other way around. Models of conditional volatility at multivariate level is employed to examine the return and volatility spillovers between the real estate and stock markets for five ASEAN countries, namely Indonesia, Malaysia, the Philippines, Singapore and Thailand. The results show evidence of the spillover effects between the real estate and stock markets from low to moderate degrees. The findings imply a better understanding and awareness for institutional investors in the international assets portfolio management and the respective governments to improve the financial prudential system to minimize the volatility effects from financial markets

Suggested Citation

  • Esta Lestari, 2010. "Volatility Spillover Effects in East Asian Capital Markets: A Case Study of the Real Estate Sectors," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 58, pages 57-82, April.
    • Handle: RePEc:lpe:efijnl:201003
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    References listed on IDEAS

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    More about this item

    Keywords

    real estate assets; stock markets; ASEAN-5; volatility spillover effects.;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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