Major global events can lead to a change in the cross-country correlation of assets. Using stock prices from 25 economies, we test whether the terrorist attack in the United States on September 11, 2001, resulted in a contagion-an increase in correlation across global financial markets. Unlike prior works on contagion, we model the intrinsic heteroskedasticity. Our results indicate that international stock markets, particularly in Europe, responded more closely to U.S. stock market shocks in the three to six months after the crisis than before. Our evidence suggests that the benefits of international diversification in times of crisis are substantially diminished. 2004 The Southern Finance Association and the Southwestern Finance Association.

No abstract

Much attention has been given to claims that real estate prices in Spain are overvalued in relation to income and how plummeting house prices can jeopardize the economy (The Economist, 2003 and IMF, 2004). The measure of income elasticity on housing expenditure is often of considerable interest to applied researchers and policy makers in real estate economics, but the problem of omitted variables in some estimation techniques can lead to severe biases. In this paper we estimate the income elasticity of the demand for housing in Spain based on the cross-section of prices and income in fifty Spanish provinces from 1996 to 2002. In comparison to long-run equilibrium models fitted with time-series data, our results show a much weaker role of income growth as a vehicle for house price increases in the long run. According to our estimates, the rate of growth of house prices in Spain between 1998 and 2003 points to a real estate bubble with prices above the long-term equilibrium level. Copyright Springer Science + Business Media, LLC 2006Income elasticity, Cross-section, Housing expenditure, R20, E21,

No abstract

Faced with dilemmas parallel to countries besieged by road congestions and limited land resources, Singapore has chosen to adapt a Vehicle Quota System (VQS) whereby car owners are required to bid for a licence in an auction before their vehicles are allowed onto the road. In this study, the behaviour of VQS auction prices is examined using a structural time series approach. For outliers that are not observable from innovations, auxiliary residuals with dummy variables are used to supplement the analysis. In general, prices exhibit a fairly constant seasonal pattern. The inclusion of monthly VQS quotas released by the transport regulatory body and the national stock market index is not useful in explaining the observed price behaviour. Interestingly, a basic structural model with stochastic components seems to fit the data best.