Cross‐market dynamics in property stock markets : Some international evidence

Purpose – Aims to investigate the long‐run and short‐term relationships among four Asian property stock markets of Japan, Hong Kong, Singapore and Malaysia; and four European property stock markets of UK, France, Germany and Italy. Additionally, aims to examine the relationships between equally‐weighted Asian and European regional property stock indices. Design/methodology/approach – The long‐term analysis is undertaken using Johansen multivariate cointegration approach. The degree of short‐term dependence is investigated with an extended EGARCH model for evidence of mean and volatility spillovers across the property stock markets. Findings – The combined findings of minimal cointegration, weak mean transmission and lack of significant evidence of cross‐volatility spillovers among the Asian and European property stock markets imply that investors would benefit from diversifying property stock portfolios internationally in Asia and Europe in the short‐ and long‐run. Originality/value – This study contributes significantly to the empirical literature on capital asset pricing and on the risk‐return performance of international real estate. In particular, the findings from the study will be useful for European investors to understand better the potential portfolio implications of investing in Asian real estate.