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This paper uses the global systemic shock associated with the outbreak of the novel coronavirus Covid-19 to assess the risk-return relationship in the cross-section of real estate equities in the US and in selected Asian countries. I construct regional Covid-19 Risk Factors (CRFs) to assess how the risk exposure of stocks to the pandemic affects their performance. I find substantial differences between stocks in Asia and the US as a result of the pandemic. During the early stages of the pandemic, the sensitivity of Asian real estate companies to the market becomes negative, while it remains positive and increases in the US. Real estate sectors experience strong divergence in performance in the US while little sectoral difference is observed in Asia. The most affected sectors in the US are retail and hotels, while in Asia it is office. A Fama–MacBeth regression shows evidence for a low-risk effect during the Covid period: while insignificant prior to the pandemic, the return-risk relationship becomes significantly negative during the Covid period, with valuation effects driving the results in both regions. Firms in the US perform significantly worse if their exposure to the pandemic is higher, which is not the case in Asia. The results point towards strong divergence of expectations between US and Asian real estate companies in the onset of Covid-19, which may be associated with the level of prior experience to similar pandemics.

This paper investigates whether bank integration measured by cross-border bank flows can capture the co-movements across housing markets in developed countries by using a spatial dynamic panel model. The transmission can occur through a global banking channel in which global banks intermediate wholesale funding to local banks. Changes in financial conditions are passed across borders through the banks' balance-sheet exposure to credit, currency, maturity, and funding risks resulting in house price spillovers. While controlling for country-level and global factors, we find significant co-movement across housing markets of countries with proportionally high bank integration. Bank integration can better capture house price comovements than other measures of economic integration. Once we account for bank exposure, other spatial linkages traditionally used to account for return co-movements across region -such as trade, foreign direct investment, portfolio investment, geographic proximity, etc. -become insignificant. Moreover, we find that the co-movement across housing markets decreases for countries with less developed mortgage markets characterized by fixed mortgage rate contracts, low limits of loan-to-value ratios and no mortgage equity withdrawal. JEL Classifications: C23, G15, F36, R3 Abstract This paper investigates whether bank integration measured by cross-border bank flows can capture the co-movements across housing markets in developed countries by using a spatial dynamic panel model. The transmission can occur through a global banking channel in which global banks intermediate wholesale funding to local banks. Changes in financial conditions are passed across borders through the banks' balance-sheet exposure to credit, currency, maturity, and funding risks resulting in house price spillovers. While controlling for country-level and global factors, we find significant co-movement across housing markets of countries with proportionally high bank integration. Bank integration can better capture house price comovements than other measures of economic integration. Once we account for bank exposure, other spatial linkages traditionally used to account for return co-movements across region -such as trade, foreign direct investment, portfolio investment, geographic proximity, etc. -become insignificant. Moreover, we find that the co-movement across housing markets decreases for countries with less developed mortgage markets characterized by fixed mortgage rate contracts, low limits of loan-to-value ratios and no mortgage equity withdrawal. JEL Classifications: C23, G15, F36, R3

We extend the IPO literature analysing the role of financial market integration in the development of IPO markets and the pricing of newly listed stocks. Using a hierarchical linear model, we show that differences in underpricing between markets with high and low financial integration levels are economically significant and may explain the choice of location in the listing process. Firstly, market integration negatively affects the level of IPO underpricing by increasing the importance and efficiency of the financial intermediation process via tradable securities. Secondly, the presence of a deeper market integration has a moderation effect, which weakens the explanatory power of country institutions in the crosscountry variation of IPO underpricing. Finally, we suggest a hierarchical structure be assumed for the modelling of crosscountry IPO studies with heterogeneous country characteristics. Our results are robust to alternative measures of financial integration and several model specifications.