Common factors in international securitized real estate markets

Abstract

This study investigates the presence of common factors in the securitized real estate markets of the Untied States (US), United Kingdom (UK), Hong Kong (HK), and Singapore (SG). Using a combination of factor analysis and canonical correlation analysis on 10‐year monthly return data for 142 real estate securities in the four markets, more common risk factors among real estate securities within a country than across countries are detected. In addition, there is at least one common securitized real estate market factor that is moderately correlated with the world real estate market, and to a lesser extent, with the world stock market. However, the degree of linkage across the four securitized real estate markets is much weaker than the strong linkages present across the four economies. It further appears that the extent to which correlations are found in international securitized real estate markets might largely be due to the increasing integrated nature of the world real economy, rather than a result of the globalization of financial markets. The results are preliminary, but indicative, and suggest that more studies exploring how common factors, together with the local market portfolio, could help explain the return‐generating process of securitized real estate.

Global Property Market Diversification

“…where the Rs are the returns for the cointegrated and independent index vectors, respectively, and the diagonal matrix Λ contains the eigenvalues of canonical correlation C. A set of canonical coefficients (B) is produced for both portfolio index sets, defined as B y ¼ R À1=2 yy B and B X ¼ ΛR À1 xx R xy B y , that maximize the correlations between the indices in the independent and cointegrated groups (Hair et al 1998). (variates) that represent the idiosyncratic commonality of each vector (Liow and Webb 2008). We use the variates as in subsequent regressions as proxies for the independent and cointegrated portfolios to contrast market risk exposures of the independent and cointegrated markets.…”

An Assessment of the Relationship between Public Real Estate Markets and Stock Markets at the Local, Regional, and Global Levels

“…In the real estate arena, Liow (2010) Glosten et al (1993, GJR) to analyse the volatility transmission between these three regions. In the real estate arena, Liow and Webb (2009) investigate the presence of common factors in the securitized real estate markets of the United States, the United Kingdom, Hong Kong, and Singapore using factor analysis. Their results have provided evidence that more common risk factors exist among real estate securities within a country than across countries.…”

Crisis management in construction and real estate: Conceptual modeling at the micro-, meso- and macro-levels

“…Operations research are also applied, e.g., statistical analysis, discriminant analysis (Haslem et al, 1992), logit and probit regression models (Canbas et al, 2005), artificial neural network models such as fuzzy clustering and self-organizing neural networks (Alam et al, 2000), the back-propagation neural networks model (Tam, 1991), multiple criteria decision-making (Pasiouras et al, 2010;Niemira and models of economic and financial instability and of behavioral finance (Minsky, 2008). Liow and Webb (2009) investigate common factors in the securitized real estate markets of the Untied States, United Kingdom, Hong Kong and Singapore. The results, although preliminary, are indicative suggesting more studies to explore how common factors in joint with a local market portfolio could help in explaining the return-generating process of securitized real estate (Liow and Webb, 2009).…”

“…Liow and Webb (2009) investigate common factors in the securitized real estate markets of the Untied States, United Kingdom, Hong Kong and Singapore. The results, although preliminary, are indicative suggesting more studies to explore how common factors in joint with a local market portfolio could help in explaining the return-generating process of securitized real estate (Liow and Webb, 2009). …”