Contagion or interdependence?. Evidence from comovements in Asia‐Pacific securitised real estate markets during the 1997 crisis
| Published date | 01 October 2004 |
| Date | 01 October 2004 |
| Pages | 401-413 |
| DOI | https://doi.org/10.1108/14635780410556889 |
| Author | Patrick Wilson,Ralf Zurbruegg |
| Subject Matter | Property management & built environment |
Contagion or interdependence?
Evidence from comovements in Asia-Pacific
securitised real estate markets during the
1997 crisis
Patrick Wilson
School of Finance and Economics, University of Technology, Sydney, Australia
Ralf Zurbruegg
School of Commerce, University of Adelaide, Adelaide, Australia
Keywords Real estate, South East Asia, Property management
Abstract This paper examines whether there was contagion from the Thai securitised real estate
market to four other prominent Asia-Pacific property markets. Based on Forbes and Rigobon’s
methodology for calculating conditional and unconditional correlations, analysis shows that there
was some contagion effect from Thailand to Hong Kong and Singapore during the period between
early July and late October 1997. However, if the period includes the stock market crisis of late
October 1997, there is little evidence for real estate market contagion, as it would seem that the
impact of the equity markets were more relevant thereafter, in affecting other financial markets
than the property markets themselves.
1. Introduction
One of the factors most commonly used by portfolio managers today is the
correlation that one asset holding has with another. This is also true for international
fund managers who are keen to diversify across countries to limit the co-movement
that their asset prices have between one country and another. Because of the
importance placed on analysing correlations, a substantial body of academic
literature has researched this area. In particular, for real estate markets, this includes
work by Eichholtz (1996) and Lu and Mei (1999), among many others (see Wilson
and Zurbruegg (2003) for a literature survey covering research using correlation
analysis).
Recently, however, research has shown that much of the earlier work conducted on
correlation analysis may actually be spurious and suffer from various forms of bias.
For example, Ang and Bekaert (2001) and Longin and Solnik (2001) have shown that
cross-correlations of international stock market returns are not constant and, in fact,
increase during volatile periods. Because of this, research by authors such as Forbes
and Rigobon (2002) and Corsetti et al. (2002) who have re-examined cross-correlations
between markets to correct for the heteroskedasticity that can exist due to the periods
of high and low volatility within a sample. Once adjusted, the results from conducting
a correlation analysis can be very different to what would previously be expected. For
instance, Forbes and Rigobon (2002) show that for the Asian crisis, the decline in the
Hong Kong stock market in October 1997 did not seem to lead to a contagion effect
upon other global stock markets, rather, the level of interdependence between stock
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
www.emeraldinsight.com/researchregister www.emeraldinsight.com/1463-578X.htm
This research was completed while Wilson was a Visiting Fellow at the Department of
Economics, University of Wollongong, Autumn, 2004.
Contagion or
interdependence
401
Journal of Property Investment &
Finance
Vol. 22 No. 5, 2004
pp. 401-413
qEmeraldGroup Publishing Limited
1463-578X
DOI 10.1108/14635780410556889
To continue reading
Request your trial