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Lead-Lag Relationship between the Real Estate Spot and Forward Contracts Markets

Author

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  • C. Y. Yiu
  • E. C. M. Hui
  • S. K. Wong

Abstract

Executive Summary. This study analyzes the lead-lag relationship between the spot and forward returns on direct real estate investments. Based on the forward price index (for which the term to maturity is zero) and the ex-post spot price index of residential property in Hong Kong, changes in information flow between the spot and forward markets are tested to see how they affect the lead-lag relationship. The findings suggest that (1) during periods of low-volume ratios (i.e., the forward market is relatively less active than the spot market), the spot return Granger causes the returns of forward contracts; and (2) during periods of higher-volume ratios, there are feedback relationships between the two markets.

Suggested Citation

  • C. Y. Yiu & E. C. M. Hui & S. K. Wong, 2005. "Lead-Lag Relationship between the Real Estate Spot and Forward Contracts Markets," Journal of Real Estate Portfolio Management, Taylor & Francis Journals, vol. 11(3), pages 253-262, January.
    • Handle: RePEc:taf:repmxx:v:11:y:2005:i:3:p:253-262
    DOI: 10.1080/10835547.2005.12089730
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