Abstract
ABSTRACT This study examines the predictive power of the newly proposed global financial cycle (GFC) and global economic conditions (GECON) indicators for real estate market volatility. To this end, we extend the GARCH-MIDAS model by simultaneously incorporating realized volatility and macro indicators along with the asymmetry effect. The empirical results reveal that both GFC and GECON provide significant predictive information on real estate market volatility. The predictive performance of GFC is superior to that of GECON, implying the important role of finance in the real estate market. The relationship between GFC/GECON and the future volatility of the real estate market is positive, and the short- and long-run asymmetry effects are evidenced.
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