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Linkages between cross-country business cycles, cross-country stock market cycles and cross-country real estate market cycles: evidence from G7

Linkages between cross-country business cycles, cross-country stock market cycles and... PurposeThis research investigates whether and to what extent the co-movements of cross-country business cycles, cross-country stock market cycles and cross-country real estate market cycles are linked across G7 from February 1990 to June 2014.Design/methodology/approachThe empirical approaches include: correlation analysis on HP cycles, HP cycle return spillovers effects using Diebold and Yilmaz (2012)'s spillover index methodology, as well as Croux et al (2001)'s dynamic correlation and cohesion methodology. FindingsThere are fairly strong cycle-return spillover effects between the cross-country business cycles, cross-country stock market cycles and cross-country real estate market cycles. The interactions among the cross-country business cycles, cross-country stock market cycles and cross-country real estate market cycles in G7 are less positively pronounced or exhibit counter-cyclical behavior at the traditional business cycle (medium-term) frequency band when “pure” stock market cycles are consideredResearch limitations/implicationsOur research is subject to the usual limitations concerning empirical researchPractical implicationsThis study finds that real estate is an important factor in influencing the degree and behavior of the relationship between cross-country business cycles and cross-country stock market cycles in G7. It provides important empirical insights for portfolio investors to understand and forecast the differential benefits and pitfalls of portfolio diversification in the long-, medium- and short cycle horizons, as well as for research studying the linkages between the real economy and financial sectors.Originality/valueIn adding to the existing body of knowledge concerning economic globalization and financial market interdependence, this study evaluates the linkages between business cycles, stock market cycles and public real estate market cycles cross G7, and adds to the academic real estate literature. Since public real estate market is a subset of stock market, our approach is to use an original stock market index, as well as a “pure” stock market index (with the influence of real estate market removed) to offer additional empirical insights from two key complementary perspectives. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of European Real Estate Research Emerald Publishing

Linkages between cross-country business cycles, cross-country stock market cycles and cross-country real estate market cycles: evidence from G7

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1753-9269
DOI
10.1108/JERER-05-2015-0024
Publisher site
See Article on Publisher Site

Abstract

PurposeThis research investigates whether and to what extent the co-movements of cross-country business cycles, cross-country stock market cycles and cross-country real estate market cycles are linked across G7 from February 1990 to June 2014.Design/methodology/approachThe empirical approaches include: correlation analysis on HP cycles, HP cycle return spillovers effects using Diebold and Yilmaz (2012)'s spillover index methodology, as well as Croux et al (2001)'s dynamic correlation and cohesion methodology. FindingsThere are fairly strong cycle-return spillover effects between the cross-country business cycles, cross-country stock market cycles and cross-country real estate market cycles. The interactions among the cross-country business cycles, cross-country stock market cycles and cross-country real estate market cycles in G7 are less positively pronounced or exhibit counter-cyclical behavior at the traditional business cycle (medium-term) frequency band when “pure” stock market cycles are consideredResearch limitations/implicationsOur research is subject to the usual limitations concerning empirical researchPractical implicationsThis study finds that real estate is an important factor in influencing the degree and behavior of the relationship between cross-country business cycles and cross-country stock market cycles in G7. It provides important empirical insights for portfolio investors to understand and forecast the differential benefits and pitfalls of portfolio diversification in the long-, medium- and short cycle horizons, as well as for research studying the linkages between the real economy and financial sectors.Originality/valueIn adding to the existing body of knowledge concerning economic globalization and financial market interdependence, this study evaluates the linkages between business cycles, stock market cycles and public real estate market cycles cross G7, and adds to the academic real estate literature. Since public real estate market is a subset of stock market, our approach is to use an original stock market index, as well as a “pure” stock market index (with the influence of real estate market removed) to offer additional empirical insights from two key complementary perspectives.

Journal

Journal of European Real Estate ResearchEmerald Publishing

Published: Aug 1, 2016

References