Dynamic Interactions Between Private and Public Real Estate Markets: Some International Evidence

The long-term linkages between direct and indirect property in Australia

“…Hoesli and Oikarinen (2012) then extended the study to include stock market and macroeconomic variables for the USA, UK and Australia, to provide more evidence to their earlier conclusions. Yunus et al (2012) also provide the same findings in their study of the real estate markets of Australia, the Netherlands, UK and USA.…”

Are REITs real estate? Evidence from international sector level data

“…Indeed, Giliberto (1990) and Geltner and Kluger (1998) show that the relationship between REIT and direct real estate returns is considerably stronger when a lead in the REIT returns is considered. Other evidence supporting the leading role of securitized real estate with respect to direct real estate is presented, e.g., by Gyourko and Keim (1992), Myer and Webb (1993), Barkham and Geltner (1995), and more recently by Li et al (2009), Oikarinen et al (2011), andYunus, Hansz andKennedy (forthcoming). The lead-lag relationships are likely to diminish the contemporaneous short-term correlation between the markets relative to the longer-horizon comovement.…”

The Consequences of REIT Index Membership for Return Patterns

“…Our findings suggest that although these financial factors are significant, they do not supersede the effects of fundamentals on joint returns. Given the recent evidence on a long-run equilibrium association between public and private real estate returns, combined with short-run lead/lag relationships between the two markets (Wang 2001, Oikarinen, Hoesli and Serrano 2011, Boudry et al 2012, Hoesli and Oikarinen 2012, Yunus, Hansz and Kennedy 2012, our findings provide fresh insight into the contemporaneous and lasting effects of underlying property market fundamentals on REIT stock returns.…”

“…The literature appears to have settled on the consensus that there is a long-run equilibrium association between public and private real estate returns, combined with short-run dynamics between the two markets (Wang 2001, Oikarinen, Hoesli andSerrano 2011). This finding has been confirmed both internationally (Yunus, Hansz and Kennedy 2012) and across different property types in the United States as well as internationally (Boudry et al 2012, Hoesli andOikarinen 2012). However, while the distinction between short-run and longrun linkages between public and private real estate has produced evidence that public real estate securities (REITs) track the underlying real estate markets in the long run, the question about contemporaneous links between REITs and their underlying real estate markets is either rejected in the literature or not independently addressed.…”