AbstractEuropean
economic and political integration have been recognised as having implications
for patterns of performance in national real estate and capital markets
and have generated a wide body of research and commentary. In 1999,
progress towards monetary integration within the European Union culminated
in the introduction of a common currency and monetary policy. This paper
investigates the effects of this ‘event’ on the behaviour of stock returns
in European real estate companies. A range of statistical tests is
applied to the performance of European property companies to test for changes
in segmentation, co-movement and causality. The results suggest that,
relative to the wider equity markets, the dispersion of performance is
higher, correlations are lower, a common contemporaneous factor has much
lower explanatory power whilst lead-lag relationships are stronger.
Consequently, the evidence of transmission of monetary integration to real
estate securities is less noticeable than to general securities. Less and
slower integration is attributed to the relatively small size of the real
estate securities market and the local and national nature of the majority
of the companies’ portfolios.
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