Price and volatility dynamics between securitized real estate spot and futures markets

This study is among the first to examine the price, volatility and covariance dynamics between securitized real estate spot and futures markets. It provides a distinctive and yet complementary perspective on the predictability of real estate spot return and spot volatility based on the information f...

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Bibliographic Details
Published inEconomic modelling Vol. 35; pp. 582 - 592
Main Authors Shi, Jing, Xu, Tracy
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.09.2013
Elsevier Science Ltd
Subjects
Asymmetric effect
Basis
Eastern Europe
Economic dynamics
Futures market
Futures trading
Hedging
Investment analysis
Modelling
Multivariate GARCH
Personal finance
Real estate
Real estate futures
Recursive cointegration analysis
REITs
Securities prices
Studies
Volatility
Western Europe
Europe
Basis
C32
R33
G13
G14
Asymmetric effect
Multivariate GARCH
Recursive cointegration analysis
Real estate futures
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Summary:This study is among the first to examine the price, volatility and covariance dynamics between securitized real estate spot and futures markets. It provides a distinctive and yet complementary perspective on the predictability of real estate spot return and spot volatility based on the information from the spot market alone. The results show that for the EPRA/NAREIT Europe index, the spot market tends to lead its futures market in the long run during the sample period, which can be attributed to a rather illiquid real estate futures market in sharp contrast with a voluminous spot market. Furthermore, we find the V-shaped asymmetric effect of the basis on the futures market volatility, which represents the primary channel of strong volatility transmission between securitized real estate spot and futures markets during the whole sample and the post-crisis period. This sheds light on the hedging effectiveness for the REIT index. •The paper explores price discovery process in the securitized real estate market.•We examine the dynamic relationships between real estate spot and futures markets.•For the EPRA/NAREIT Europe index, the spot market tends to lead its futures market.•We find the V-shaped asymmetric basis effect on the futures market volatility.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
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ISSN:0264-9993
1873-6122
DOI:10.1016/j.econmod.2013.08.003