Abstract:
We construct synchronously priced indices of securitized property listed on the
New York Stock Exchange and London Stock Exchange. The indices are then
utilized to examine dynamic information flows between the two markets. By analyzing
returns behavior, asymmetric volatility spillover effects and exceedance
correlations, this study shows that the real estate markets in these two countries
experience significant interaction on a daily basis when synchronously priced
data are utilized. These results are different from when close-to-close returns
are examined, implying that the use of close-to-close data can misconstrue the
true dynamics that exist between these markets. Results also show significant
asymmetric effects on both the volatility and correlation dynamics between the
markets. This has several implications for property portfolio managers, indicating
that positive and negative news impact the markets differently. This is
particularly true for the United Kindom, where daily foreign news from the United
States can influence U.K. volatility.
