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As rapid economic growth in China has led to significant appreciation of urban real estate market values, this study examines China's influence on Asian-Pacific real estate markets by focusing on their respective market integration with the US, Japan and China during the period January 2005 to December 2017. Market integration is examined by unconditional and time-varying conditional correlations, nonlinear Granger causality and dynamic connectedness effects. Overall, although the US and Japanese real estatemarkets have significantly influenced return and volatility in the regional markets, China has emerged as another major regional real estate volatility leader with rising influence over volatility integration, especially during the 2007-2011 crisis period. Financial crises have strengthened China's volatility connectedness effects and market integrationwith other Asian-Pacific real estate markets. Our results imply that the benefits of regional portfolio diversification may be declining as volatility integration across the Chinese and Asian-Pacific real estate markets becomes stronger. Therefore, diversified global investors should pay greater attention to these real estate markets.

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PurposeWith growing interdependence between financial markets, the goal of this paper is to examine the dynamic interdependence between corporate equity and public real estate markets for the USA and a select group of seven European developed economies under a cross-country framework in crisis and boom market conditions. Dynamic interdependence is related to four measures of market linkages of “correlation, spillover, connectedness and causality”.Design/methodology/approachThis study adopts a four-step investigation. The authors first estimate “time-varying variance–covariance spillovers and implied correlations” modeled with the bivariate BEKK-MGARCH methods. Second, the methods of Diebold and Yilmaz (2012, 2014) measure the conditional volatility spillover-connectedness effects across the corporate equity and public real estate markets based on a decomposition of the forecast error variance. Third, the authors implement nonlinear bivariate and multivariate causality tests to understand the lead-lag dynamics of the two asset markets' returns, volatilities and net directional volatility connectedness across different sample periods. Finally, the authors conclude the study by providing a portfolio hedging analysis.FindingsThe authors find that corporate equity and public real estate are moderately interdependent to the extent that their diversification benefits increases in the longer term. Moreover, the authors find increased corporate equity-public real estate causal dependence of the market groups of the European and international portfolios during the GFC and INTERCRISIS periods. The nonlinear causality test findings indicate that the joint information of asset markets can be a useful source of prediction for future innovation of market risks. Additionally, policy makers may also be able to employ conditional volatility and volatility connectedness as two other measures to manage market stability in the cross-asset market dependence during highly volatile periods.Research limitations/implicationsOne major take away from this academic research is since international portfolio investors are not only concerned the long-term price relationship but also the correlation structure and volatility spillover-connectedness, the conditional BEKK modeling, generalized risk connectedness analysis and nonlinear causal dependence explorations from this multi-country study can shed fresh light on the nature of market interdependence and magnitude of volatility connectedness effects in a multi-portfolio framework.Practical implicationsThe hedging performance analysis for portfolio diversification and risk management indicates that industrial stocks (“pure” equities) are valuable assets that can improve the hedging performance of a well-diversified corporate equity-public real estate portfolio during crisis periods. For policymakers, the findings provide important information about the nature of causal links and predictability during the crisis and asset-market boom periods. They can then equip with this information to manage and coordinate market stability in cross corporate equity-real estate relationships effectively.Originality/valueAlthough traditional research has in general reported at least a moderate degree of relationship between the two asset markets, investors' knowledge of stock-public real estate market linkage is somewhat inadequate and confine mostly to broad stocks (i.e. stocks that are exposed to public real estate influence) in a single-country context. In this paper, the authors examine the interdependence dynamics in a multi-country (multi-portfolio) context. A clear understanding their changing market relationships in a multi-country context is of crucial importance for portfolio investors, financial institutions and policy makers. Moreover, since the authors use an orthogonal stock market index, the authors allow global investors to understand the potential diversification benefits from stock markets that are beyond the public real estate market under different market conditions.

This paper examines investment dynamics of six major Singapore asset markets (general stock, property stock, residential, office, retail and industrial) over the last 45 years by focusing on their dynamic correlations, varying spillover-connectedness, Granger causal dependence and selective frequency return connectedness to understand better the changing market relationships among the six markets, as well as the wealth effects between the stock and housing markets. We find that the six asset markets have not become more correlated over time. The 2007–2009 global financial crisis has created the most severe contagion among the markets and was followed by Singapore economic recession. Although these six markets were quite moderately connected in their returns and risk, the return and risk connectedness index measures reached their respective low levels in recent years. The net directional connectedness of the six markets varies in different periods of domestic economic development, external financial crisis and domestic economic recession. Moreover, the housing market leads significant causal interactive roles (linear and nonlinear) over other property and stock markets. On the other hand, the stock market is a strong return transmitter for most of the research periods. The long-term horizon was the most important in contributing to the leadership position in return connectedness of housing market during the Asian financial crisis. Finally, a key message derived from this “long-period” study is that an in-depth understanding of the various investment dynamics is crucial to help maximize mixed portfolio diversification benefits and managing risk in Singapore stock and property markets in the long run.