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Nonlinear contagion between stock and real estate markets: international evidence from a local Gaussian correlation approach

Bouri, E., Gupta, R. and Wang, S. ORCID: https://orcid.org/0000-0003-2113-5521 (2020) Nonlinear contagion between stock and real estate markets: international evidence from a local Gaussian correlation approach. International Journal of Finance and Economics. ISSN 1099-1158

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To link to this item DOI: 10.1002/ijfe.2261

Abstract/Summary

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. The employed method not only avoids the bias of the conditional correlation, but also describes any nonlinear structure in dependence and the deviation from global normality. In general, we find strong evidence of nonlinear 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.

Item Type:Article
Refereed:Yes
Divisions:Faculty of Arts, Humanities and Social Science > School of Politics, Economics and International Relations > Economics
ID Code:92251
Publisher:Wiley

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