NDLI: Long-Term Co-Memories and Short-Run Adjustment: Securitized Real Estate and Stock Markets

Content Provider	Springer Nature Link
Author	Liow, Kim Hiang Yang, Haishan
Copyright Year	2005
Abstract	This study considers whether securitized real estate and stock markets have long-term co-memories and implications for short-term adjustment. Our results offer reasonable support for fractional cointegration (characteristic of a long memory process) between securitized real estate price, stock market price and key macroeconomic factors in some economies. The implication is that where fractional cointegration prevails, securitized real estate and common stocks are substitutable assets over the long run and these assets may not be held together in a portfolio for diversification purpose. Furthermore, short-run analysis indicates that the speed of adjustment towards the long-run equilibrium is faster for fractional integrated vector error correction model (FIVECM) than VECM as the former incorporates a long history of past cointegration residuals. Additional comparisons of the two models’ forecasting accuracy show that incorporating fractional cointegration in a VECM model improves the forecasting performance over conventional VECM models. Our results reinforce the notion that cointegration, fractional cointegration and short-run adjustment dynamics are important in understanding market integration/segmentation.
Starting Page	283
Ending Page	300
Page Count	18
File Format	PDF
ISSN	08955638
Journal	The Journal of Real Estate Finance and Economics
Volume Number	31
Issue Number	3
e-ISSN	1573045X
Language	English
Publisher	Kluwer Academic Publishers
Publisher Date	2005-09-14
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	securitized real estate market stock market long-term co-memories fractional cointegration fractional integrated vector error correction model Regional Science Finance /Banking
Content Type	Text
Resource Type	Article
Subject	Finance Urban Studies Accounting Economics and Econometrics

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