Kim Hiang Liow

Co‐Movements and Correlations Across Asian Securitized Real Estate and Stock Markets

This research examines time-varying real estate-stock conditional correlation dynamics at the local, regional, and global levels as well as the general co-movements among the three types of correlations and their relative (real estate/stock) volatilities for a sample of eight Asian and two non-Asian securitized real estate markets during 1995-2008. We find real estate-stock correlations at the three levels do not display significant upward trending behavior. There is evidence of the existence and significance of some common factors influencing the real estate-stock correlation structures along the three integration paths. Our analysis is also extended to the current global financial crisis to assess the relative contribution of the correlation and volatility factors in influencing the respective covariance structures. The dynamic analyses of real estate-stock conditional correlations are crucial in identifying the optimal real estate-stock portfolio of investors across different economies with non-uniform degrees of real estate-stock integration at the local, regional and global levels.

Financial Crisis and Asian Real Estate Securities Market Interdependence: Some Additional Evidence

This paper investigates empirically the changes in long‐run relationship and short‐term linkage among the US, UK and eight Asian real estate securities markets before, during, and after the 1997–1998 Asian financial crisis as well as in the most recent period. Using a combination of Johansen linear cointegration, Bierens nonlinear cointegration, Granger causality tests, variance decomposition analysis and volatility spillover methodology, our results indicate that the degree of market interdependence in Asian real estate securities markets appears to have become stronger in the long run and short term since the Asian financial crisis. Further, this market interdependence seems to be on a rising trend ten years after the Asian financial crisis. This stronger market relationship between the Asian and US markets implies a portfolio combination of these markets is less likely to provide diversification benefit in the form of minimum risk. One important lesson to learn from our study is that portfolio managers should constantly review their international diversification models and strategies with respect to the constituent markets because of possible changes in market interdependence triggered by a major crisis.

The Dynamics of Return Volatilty and Systematic Risk in International Real Estate Security Markets

We find clustering, predictability, strong persistence and asymmetry in the conditional volatilities of national, regional and world real estate security markets. The world real estate security market volatility has a positive impact on the time‐varying real estate security market betas of Asia‐Pacific, Hong Kong, Singapore and Malaysia, and a negative impact on the real estate security market betas of Europe and the UK. The extra country–specific market volatility and global market volatility during the Asian financial crisis period impose a larger size influence than the volatility during total period in some markets. In addition, our results appear to favor the time‐varying beta estimates relative to the world real estate security market index over the world stock market index. The implications for international investors and global portfolio managers is that failing to understand the complex dynamics of real estate security market return, volatility and systematic risk relative to the world markets may make it less possible to ascertain the true potential of international real estate diversification that includes Asia‐Pacific securitized real estate.

The Risk and Return Profile of Asian Real Estate Stocks

AbstractThis research examines the risk and return profile of Asian real estate stocks from an American investor’s point of view. Our results indicate that Asian real estate security markets have not produced high levels of compound returns relative to the US REIT and UK real estate stock markets since the 90’s. They have also experienced a higher level of volatility compared to their USA and UK counterparts. Asset allocations using meanvariance optimization are difficult to carry out, as many of the Asian property stock markets are not normally distributed. In addition, Asian real estate stocks have been able to provide diversification benefits in international investing that includes the US and UK security portfolios. However, the case for separate allocations to international real estate is weakened by the high correlations that are found in Asian markets between the real estate stock and broader market indexes.Abstract This research examines the risk and return profile of Asian real estate stocks from an American investor’s point of view. Our results indicate that Asian real estate security markets have not produced high levels of compound returns relative to the US REIT and UK real estate stock markets since the 90’s. They have also experienced a higher level of volatility compared to their USA and UK counterparts. Asset allocations using meanvariance optimization are difficult to carry out, as many of the Asian property stock markets are not normally distributed. In addition, Asian real estate stocks have been able to provide diversification benefits in international investing that includes the US and UK security portfolios. However, the case for separate allocations to international real estate is weakened by the high correlations that are found in Asian markets between the real estate stock and broader market indexes.

Dynamic relationship between stock and property markets

This paper investigates the long-run and short term relationships between stock and property markets. Focus is on the combined and relative impacts of a real estate system that comprises residential and office property prices on general stock market prices. Using Autoregressive Distributed Lag (ARDL) cointegration procedure, a long-run contemporaneous relationship is found between the stock and property prices. Additionally, both the long-run and short-term influences of the combined residential and office property prices on the stock market prices weakened after controlling for changes in the macroeconomic influences. Whilst the stock market prices are largely influenced by the office property prices in the long run; the residential property prices impact stronger on the stock market prices in the short-term. Thus the combined perspective has significant implications in mixed asset allocation that includes stock and property investments.

Do Asian real estate companies add value to investment portfolio

Purpose - The purpose of this paper is to examine the role of Asian real estate companies with regard to their “value-added” performance and portfolio diversification benefits in Asian mixed-asset portfolios, as well as in international real estate securities portfolios over 1996-2005. Design/methodology/approach - First the risk-return performance for all 13 Asian as well as the US and UK real estate securities markets is compared. For each country, next the correlation profiles between real estate, common stock, bonds and cash are assessed. The value-add benefits of Asian real estate securities in an unconstrained and constrained mixed asset portfolio are then assessed in relation to portfolio return, risk and terminal wealth. Finally, the paper explores whether there are benefits derived from international diversification with a universe of Asian real estate securities from the perspectives of the US and UK investors. Findings - It was found that, whilst there is little evidence of diversification benefits and superior risk-adjusted performance of Asian real estate companies in Asian mixed-asset portfolios, diversification into Asian real estate stocks can provide positive portfolio implications for international investors. Thus investing in Asian real estate securities portfolios rather than investing in Asian mixed-asset portfolios may be seen to be the more effective diversification strategy over this period. Originality/value - The study has provided some interesting and important insights into the dynamics and performance of Asian real estate securities. With an increased emphasis on international property investment and as the regional upturn becomes more evident, Asian real estate companies potentially provide an important real estate investment opportunity for international property fund mangers.

The long‐term investment performance of Singapore real estate and property stocks

Examines the investment performance of Singapore real estate and property stocks over the past 25 years. Evaluations using coefficient of variation (CV), Sharpe index (SI) and time‐varying Jensen abnormal return index (JI) suggest that real estate outperformed property stocks on a risk‐adjusted basis. Results also indicate that risk‐adjusted investment performance for residential properties remained superior to performance for other real estate types and property stocks. Further analysis using time‐varying JI reveals that the excess return performance of property stocks could differ significantly from that of direct properties, and performance of property stock led real estate market performance. Finally, the performance implications arising from the study are evaluated.

The dynamics of the Singapore commercial property market

This paper assesses the cointegration characteristics of commercial property prices, property stock prices, gross domestic product (financial and business services/ commerce), interest rates and supply of commercial space in the Singapore economy over the period 1980–1997. The primary motivation is to provide useful insights into the long-term and short-run dynamics of commercial property market in the presence of stock market conditions and macroeconomic influences. Our evidence suggests that commercial property market is linked to the property stock market and macroeconomic conditions in the long run, and that about 0.10 of the deviations between the actual and the equilibrium value of commercial property price is corrected in each quarter.

The historical performance of Singapore property stocks

Investigates the investment performance of listed Singapore property companies over the past 21 years. Risk‐adjusted performance for the companies remained inferior to stock market performance. There is some evidence that the companies’ investment performance was not consistent over time. Also finds that property companies’ performance is tied to the stock and property markets. Finally, property stocks failed to provide hedges against observed, expected and unanticipated inflation.

Co-movements and Correlations Across Asian Securitized Real Estate and Stock Markets: Co-movements and Correlations across Asian Securitized Real Estate and Stock Markets

This research examines time-varying real estate-stock conditional correlation dynamics at the local, regional, and global levels as well as the general co-movements among the three types of correlations and their relative (real estate/stock) volatilities for a sample of eight Asian and two non-Asian securitized real estate markets during 1995-2008. We find real estate-stock correlations at the three levels do not display significant upward trending behavior. There is evidence of the existence and significance of some common factors influencing the real estate-stock correlation structures along the three integration paths. Our analysis is also extended to the current global financial crisis to assess the relative contribution of the correlation and volatility factors in influencing the respective covariance structures. The dynamic analyses of real estate-stock conditional correlations are crucial in identifying the optimal real estate-stock portfolio of investors across different economies with non-uniform degrees of real estate-stock integration at the local, regional and global levels.