Lead-Lag Relationship Between the Real Estate Spot and Forward Contract Markets PDF Download
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Author: Edward Chung Yim Yiu
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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This study analyzes the lead-lag relationship between the spot and forward returns on direct real estate investments. Based on the forward price index (for which the term to maturity is zero) and the expost spot price index of residential property in Hong Kong, changes in information flow between the spot and forward markets are tested to see how they affect the lead-lag relationship. The findings suggest that (1) during periods of low-volume ratios (i.e., the forward market is relatively less active than the spot market), the spot return Granger causes the returns of forward contracts; and (2) during periods of higher-volume ratios, there are feedback relationships between the two markets.
Author: Edward Chung Yim Yiu
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This study analyzes the lead-lag relationship between the spot and forward returns on direct real estate investments. Based on the forward price index (for which the term to maturity is zero) and the expost spot price index of residential property in Hong Kong, changes in information flow between the spot and forward markets are tested to see how they affect the lead-lag relationship. The findings suggest that (1) during periods of low-volume ratios (i.e., the forward market is relatively less active than the spot market), the spot return Granger causes the returns of forward contracts; and (2) during periods of higher-volume ratios, there are feedback relationships between the two markets.
Author: Siu Kei Wong
Publisher:
ISBN:
Category :
Languages : en
Pages : 26
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We examine the effect of forward sale (pre-sale) activities on the volatility of spot prices in the real estate market. The abundance of pre-sales data and major changes in regulatory control on the pre-sale market during the 90's in Hong Kong allow us to undertake empirical tests using Hong Kong's real estate data. Our results show that the volatility of spot prices increased significantly after forward sales were severely dampened by regulatory control measures introduced in 1994, but decreased again when the measures were partly relaxed in 1998. The results contribute to the long lasting debate on whether the introduction of a futures market reduces the volatility of spot prices. Previous studies were mainly conducted in markets with low transaction costs, notably financial markets. By utilizing the unique regulatory changes in the pre-sale market of Hong Kong, we are able to conduct an experiment on the conditional volatility of spot prices in a high information-cost environment, thereby shedding light on the important role of forward housing contracts in providing price expectation information for spot trading.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 50
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Author: Siu Kei Wong
Publisher:
ISBN:
Category :
Languages : en
Pages : 19
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How shocks in one market influence the returns and volatility of other markets has been an important question for portfolio managers. In the finance literature, many studies found evidence of volatility spillovers across international markets, as well as between spot and futures markets. Although real estate is often regarded as a good vehicle for diversification, the dynamics of its volatility transmission have been largely ignored. This paper provides the first study to examine volatility spillovers between the spot and forward (pre-sale) index returns of the Hong Kong real estate market through a bivariate GARCH model. Transaction-based indices were used so that our volatility modelling was free from any smoothing problem. Our results showed that real estate returns exhibited volatility clustering, and the volatility of the forward market was more sensitive to shocks than the spot market. Moreover, volatility was mainly transmitted from the forward market to the spot market, but not vice versa.
Author: Edward Chung Yim Yiu
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Noise trading has been intensively studied in finance, but rarely in real estate. Theories of price dispersion have also been well established in retailing research, but less so in real estate. This paper is the first attempt to study the effect of noise trading on price dispersion in the real estate spot and presale (forward) markets. Quality-controlled price dispersion data series are estimated using a sample of transaction data in the housing presale and spot markets in Hong Kong. Our results show that transaction volume has a negative and significant effect on price dispersion in the spot market, but a positive and significant in the presale market. These support our conjecture that there are more noise traders in the presale market due to lower transaction costs. The volume effects also provide support for the use of a volume weighted least squares model when constructing a repeat sales index.
Author: Zengxiang Jin
Publisher: Open Dissertation Press
ISBN: 9781374670679
Category :
Languages : en
Pages :
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This dissertation, "Price Discovery in the Property Forward and Spot Markets" by Zengxiang, Jin, 金增祥, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: Abstract of thesis entitled PRICE DISCOVERY IN THE PROPERTY FORWARD AND SPOT MARKETS Submitted by Zengxiang Jin, B.Eng., M.Phil. for the degree of Doctor of Philosophy at The University of Hong Kong in February 2007 Price discovery is the process by which market aggregates diversified options and disseminates the fundamental information in the form of realized price. This thesis presents a study on how the property presale (forward sale of uncompleted units) and spot (transaction of completed units) markets compete with each other in price discovery using empirical data from Hong Kong. A number of related topics are covered in this research. First, the price discovery process in the two markets at aggregate levels is investigated. Two complementary approaches are employed for this purpose. The first depicts the temporal lead-lag relationship between the two markets and the second focuses on quantifying the information shares that characterize the two markets' contributions to price discovery. Empirical results suggest that the presale and the spot markets are cointegrated. The VEC model further indicates that the presale market is responsible for error correction while the spot market is not, indicating that spot leads presale in price discovery. For short-term dynamics, the presale return depends on both its own lags and those of the spot return, while the spot return depends exclusively on its own lags, indicating that the short-term innovations unilaterally spillover from the spot to the presale market. This is further confirmed by Hasbrouck's (1995) and the Gonzalo and Granger's (1995) information share measures. The second issue is on the impact of liquidity (transaction volume) on price discovery. Previous studies suggest that price discovery efficiency is affected by both market vliquidity and transaction cost. Therefore, the higher information share of the spot market at aggregate level does not necessarily imply informational efficiency at transaction level. When the liquidity of spot market is controlled to be identical to that of presale market through simulations, information shares of the two markets are found to be similar, despite the differences in the nature of the information asymmetry problem in the two markets. Our results reconfirm that information share is positively related to market liquidity. Change of policies that affect transactions costs in the Hong Kong's property market presents a unique opportunity to investigate how changes in transaction costs affect price discovery. Contrary to the familiar argument that higher transaction cost impairs the price discovery function of a market, we found that transaction cost has a positive impact on the information share of the presale market. We argue that this is due to the presence of both noise traders and professional traders in the presale market. Functioning like an information filter, higher transaction cost drives the uninformed noise traders out of the presale market. However, in the spot market, most traders are more or less equally informed and therefore increase in transaction cost has less effect on price discovery. This is confirmed by the dominance of the presale market over the spot market in price discovery during periods of higher transaction costs. vi DOI: 10.5353/th_b3895775 Subjects: Real property - Prices - Mathematical models
Author: Jean Louis Heck
Publisher:
ISBN: 9780070277908
Category : Business & Economics
Languages : en
Pages : 498
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Author:
Publisher:
ISBN:
Category : Dissertations, Academic
Languages : en
Pages : 582
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Author: United States. Federal Open Market Committee
Publisher:
ISBN:
Category : Federal Reserve banks
Languages : en
Pages : 906
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Author:
Publisher:
ISBN:
Category : Finance
Languages : en
Pages : 508
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