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Researches On Correlations Between Hong Kong Real Estate Market And Related Markets

Posted on:2014-03-15Degree:DoctorType:Dissertation
Country:ChinaCandidate:B L YangFull Text:PDF
GTID:1109330425973330Subject:Management Science and Engineering
Abstract/Summary:PDF Full Text Request
Real estate has an irreplaceable position in the economic life. It provides the necessary premises for residents, forms an important part of the residents’ overall wealth, and has a strong investment or speculative function. As a connection of real economy and virtual economy, real estate market is directly related to the degree of economic prosperity. It has a high degree of relevance with many industries in the national economy, and is very tightly linked to the financial industry and financial system. In this context, researches on the correlations between real estate market and related markets have an inherent logical support, and a strong practical significance. They can contribute to market investments, and help the manager to understand the market condition and develop appropriate policies.Hong Kong real estate market gains international and financial characteristics, and is one of the majority industries of Hong Kong economy. The data of the market is also complete.Thus the Hong Kong real estate market has good research properties, which forces the thesis to take it as the main research object. What is more, since Hong Kong and the Mainland are specially related, researches on the correlations between real estate market and related markets in Hong Kong can promote the similar researches on Mainland market. Four parts of the thesis examine the sub-topics of the issue and the corresponding problems.Main research contents and innovations are as follows:To begin with, the thesis uses the DCC-GARCH model to examine the dynamic correlation and dynamic spillovers between real estate market and the stock market of Hong Kong. Empirical results show that the two markets are relatively independent to each other. Dynamic correlation between the two index returns has a low level, ranging from6%to13%. The dynamic correlation reached relatively high level around two financial crisis periods during the sample period. Stock market has a high level of dynamic spillover effect to the real estate market, which became the maximum in the late2008financial crisis period. This further validates the phenomenon that correlation between financial assets enhanced under special circumstances. On the other side, there is no significant spillover effect from real estate market to stock market.Furthermore, the thesis studies the dynamic correlations among real estate markets of four Hong Kong regions, by introducing VAR model, and DSTCC-GARCH model which allows external factors to influence the dynamic correlation. Bank prime lending rate and lagging Hang Seng Index annualized return show significant impact on these dynamic correlations as two external factors. Hong Kong Island is highly correlated to Kowloon and New Territories West, while Kowloon is lowly correlated to New Territories East and New Territories West. Dynamic correlation between Hong Kong Island and New Territories East is a little different from the other five dynamic correlations and shows a slow upward trend. In addition, six dynamic correlations show local high levels around two financial crisis periods.Last but not least, the thesis divides Hong Kong real estate asset into five kinds of residential with different areas, and divides Hong Kong inflation into cumulative inflation and three inflations for families with different consumption levels. Then the thesis uses long-term equilibrium model and short-term error correction model to study the inflation hedging abilities of residential properties on expected inflation and unexpected inflation, illustrating the relationship between real estate and commodity, labor, consumption markets from the side.All types of residential have strong long-term and short-term hedging abilities on unexpected components of all types of inflation. In the long run, all types of residential have some ability to hedge all types of expected inflation, while the ability of smaller residential is slightly stronger. In the short run, residents with lower consumption level can gain expected inflation hedge by all types of residential. Middle consumers get best expected inflation hedge by residential of70square meters to99.9square meters.Residents with high consumption can gain some expected inflation hedge only by larger houses.Finally, the thesis selects daily data of Hang Seng REIT Index, Hang Seng Utilities Index and Hibor overnight rate to describe the real estate security, stock and risk-free asset. It then uses DCC-GARCH model to gain the dynamic correlations among the three assets, and calculates the daily optimal dynamic portfolio by using portfolio theory. Ratios of the three assets, while having time-varying characteristics, but are relatively stable. And REIT Index is always the largest proportion of the entire portfolio.The extreme values of the dynamic selection always arises during the same period as the time when dynamic correlation between REIT Index return and Utilities Index return shows its extreme values. It indicates that the correlation between the two indices may impact the optimal portfolio most.
Keywords/Search Tags:Hong Kong Real Estate, Dynamic Correlation, Inflation Hedge, Portfolio
PDF Full Text Request
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