Measuring spillover effects across Asian property stocks

Abstract

This paper uses a structural time series approach to isolate stochastic trend and cyclical components across a system of securitized Asian property markets. For the purposes of understanding the degree of commonality and spillover effects of behaviour across property markets, these real estate markets are treated as a system of endogenous variables with any spillover effects measured by intermarket dependencies of the unobserved stochastic components. This is combined with an examination of long-run trends within Asian property markets to reveal a broad level of interdependence that transcends the Asian Financial Crisis of 1997. These results further highlight the importance for financial analysts to examine securitized real estate behaviour, as it may provide useful information on explaining general equity market movements.