Abstract
The aim of this paper was to examine the relationship between changes in the US and China macroeconomic conditions and the excess returns of nine Asian-Pacific public real estate markets (Singapore, Indonesia, Malaysia, the Philippines, Thailand, Australia, Taiwan, Hong Kong, and Japan). We found that there are insignificant correlations between macroeconomic conditions in the US and China and the real estate markets’ excess returns. Additionally, whilst the US macroeconomic factors show stronger causal relationships with the real estate markets in the long run, China’s macroeconomic variables have experienced a stronger causal relationship in the short run. Finally, key macroeconomic variables, such as the industrial production output index, long-term interest rates, and economic policy uncertainty, produced fluctuating impulse responses to shocks from the US and China. Overall, we conclude that the US economy continues to have a dominant influence in the Asian-Pacific real estate markets. However, during economic crises and in the short run, the impact of China’s economy grows significantly and outweighs that of the US In the context that a high degree of economic and financial integration has affected the interdependent level of international financial markets, the Asian-Pacific securitized real estate markets’ performances are also impacted by global shocks
Highlights
In recent years, the emergence of China (CH) as the global economic superpower has garnered significant attention among economists and investors alike
Where REERi,t is the monthly excess return for the ith APAC country at time t, IPIt−1 is the change in the industrial production index at time t − 1, LTINTt−1 is the change in the 20-year treasury yield (US)/10-year government bond yield (China) at time t − 1, CPIt−1 is the change in the consumer price index at time t − 1, MSt−1 is the change in the monetary aggregate M3, and CVt−1 is the change in conditional volatility in the US and China markets, respectively
Whilst CH has a total of eight significant results, the US only derives four significant explanatory results, with the last column of Table 4 showing the R2 for the multi-factor models
Summary
The emergence of China (CH) as the global economic superpower has garnered significant attention among economists and investors alike. International investors demand an extra ERP because APAC markets are affected by local/regional factors (Donadelli and Prosperi 2012). Another development that happened within the region is that the growing strong linkages between international stock markets and between international bond markets over the past decade prompted investors to search for different opportunities to diversify their portfolios. In this context, real estate investments have emerged to show low correlation with stocks and bonds, and have appropriate characteristics contributing to portfolio optimization (Schindler 2011). Many APAC public real estate has since grown in importance as a destination for international portfolio investment
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