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Contagion between Stock and Real Estate Markets: International Evidence from a Local Gaussian Correlation Approach

Author

Listed:
  • Elie Bouri

    (USEK Business School, Holy Spirit University of Kaslik, Jounieh, Lebanon)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, South Africa)

  • Shixuan Wang

    (Department of Economics, University of Reading, Reading, RG6 6AA, United Kingdom)

Abstract

In this paper, we analyze contagion over the daily period of January 1, 1998 to September 13, 2018 between Real Estate Investments Trusts (REITs) and the equity markets of nineteen countries, which are at their different stages of development in terms of the REITs market. For our purpose, we use the local Gaussian correlation approach during the dot-com, global financial, European sovereign debt crises, and the more recent period involving the Brexit in the UK. In general, we find strong evidence of contagion between equities and REITs of not only matured and established markets, but also in economies with an emerging REITs sector, especially during the global financial and sovereign debt crises. Further, when we considered contagion across REITs of the US and the other countries, and between US REITs and equities of the remaining eighteen countries, a similar pattern emerges. Our results have important implications for investors and policymakers alike.

Suggested Citation

  • Elie Bouri & Rangan Gupta & Shixuan Wang, 2019. "Contagion between Stock and Real Estate Markets: International Evidence from a Local Gaussian Correlation Approach," Working Papers 201917, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201917
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    Cited by:

    1. Nazlioglu, Saban & Gupta, Rangan & Gormus, Alper & Soytas, Ugur, 2020. "Price and volatility linkages between international REITs and oil markets," Energy Economics, Elsevier, vol. 88(C).
    2. Imran Yousaf & Shoaib Ali, 2020. "Integration between real estate and stock markets: new evidence from Pakistan," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 13(5), pages 887-900, April.
    3. Goodness C. Aye & Christina Christou & Rangan Gupta & Christis Hassapis, 2024. "High-Frequency Contagion between Aggregate and Regional Housing Markets of the United States with Financial Assets: Evidence from Multichannel Tests," The Journal of Real Estate Finance and Economics, Springer, vol. 69(2), pages 253-276, August.
    4. Fasanya, Ismail O. & Oyewole, Oluwatomisin J., 2023. "On the connection between international REITs and oil markets: The role of economic policy uncertainty," Resources Policy, Elsevier, vol. 81(C).

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    More about this item

    Keywords

    REITs; Equities; Financial crises; Contagion; Local Gaussian correlation;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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