This paper studies the role of regime shifts and time-varying volatilities in market integration in a Markov-switching volatility
regime environment among the US, European and Asian developed securitised real estate markets. With a two-state volatility
model, the study finds the co-dependence, co-movement and synchronisation of volatility regime at the high volatility state
are stronger between the US and European securitised real estate markets. Although correlations among the markets are higher
in a high volatility regime than in a low volatility regime, there is limited evidence of contagious effects during the high
volatility periods between some markets. Moreover, the unsecuritised real estate markets are different from their securitised
equivalent in the volatility regime characteristics, correlation pattern and level, as well as the extent of correlation change
and contagion effect in high volatility state. Thus, the regime-switching results from stock markets may not be automatically
extended to the corresponding public real estate markets, and require rigorous empirical scrutiny.
JEL-Codes:F31
Keywords:Volatility regimes, Cross-market correlations, Securitised real estate markets, Bivariate SWARCH model, Markov-switching vector
autoregressive model
Research group:Regional Economics and Spatial Analysis