The impact of expectations on the co-integration relationship between the stock and REIT markets

Erol U., Yüksel S. A., Yuksel A., Ozturk H.

Global Business and Economics Review, cilt.27, sa.1, ss.20-42, 2022 (Scopus) identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 27 Sayı: 1
  • Basım Tarihi: 2022
  • Doi Numarası: 10.1504/gber.2022.10044384
  • Dergi Adı: Global Business and Economics Review
  • Derginin Tarandığı İndeksler: Scopus, International Bibliography of Social Sciences, Aerospace Database, Communication Abstracts, EconLit, INSPEC, Metadex, Civil Engineering Abstracts
  • Sayfa Sayıları: ss.20-42
  • Anahtar Kelimeler: expected US short-term interest rates, global, international diversification, regional co-integration, the US yield spread, variable term premium
  • TED Üniversitesi Adresli: Hayır

Özet

This paper examines if expectations have a significant impact on the co-integration relationship between stock and real estate investment trust markets. We use two widely followed expectation indicators which are the US yield spread and the expected US stock market volatility (VIX) to test this hypothesis. The US yield spread is decomposed into two components which are the expected short-term interest rate (EF) and a variable term premium (TP) using Hamilton-Kim algorithm. A dataset covering ten developed markets is used. Using co-integration score analysis our findings indicate that expected US short-term interest rates and expected US stock market volatility have a statistically significant and positive impact on the global co-integrations of different countries. This effect is especially valid in the post-global financial crisis period. The expectation-based indicators EF and VIX, however, do not seem to have a significant impact on co-integration at regional and local levels.