Modeling Relationships among Securitized Property Markets, Stock Markets, and Macroeconomics Variables

Abstract

This paper investigates the dynamic interactions among securitized property markets, stock markets, and key macroeconomic factors for ten developed nations throughout North America, Europe, Australia, and Asia. The results indicate that each property market is co-integrated with its respective stock market and with key macroeconomic factors in the long run and is also influenced by the overall economy in the short run. Further analysis reveals that, for the overwhelming majority of countries involved, shocks to the stock market, GDP, money supply, and inflation induce a positive response in property returns, while shocks to long-term interest rates induce a negative response, although the extent of the responses differ across countries/regions.