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The integration of direct real estate and stock markets in Asia

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Currently, there exists relatively little research investigating the long-term association between stock and direct real estate markets. Using appropriate transaction-based property indices, this study focuses on the relationship between stock and direct real estate markets in nine Asian countries from the period 1980 to 2012 through both linear and nonlinear cointegration techniques. We find empirical evidence of linear cointegration of stock and property markets in Taiwan, fractional cointegration in Singapore and Hong Kong and no evidence of cointegration in China, Japan, Thailand, Malaysia, Indonesia and South Korea. It is concluded that segmentation of property markets from stock markets does not appear to be linked to the differences in the maturity of national financial markets and that the differing degrees of integration across Asia may instead be reflective of a range of factors impacting upon the underlying economic structures in each country.

Keywords: Asia; C22; G11; cointegration; direct real estate; stocks

Document Type: Research Article


Affiliations: 1: School of Finance, Actuarial Studies and Applied Statistics, Australian National University, Canberra, Australia 2: Department of Land Economy, University of Cambridge, Cambridge, UK

Publication date: April 23, 2014

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