Monetary Integration
and Real Estate Markets: An Investigation of the Impact of the Introduction
of a
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Single Currency on Real
Estate Performance
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Colin Lizieri, Patrick
McAllister and Charles Ward
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Working Papers in Real
Estate & Planning 12/03
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pp 39
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Abstract
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This paper assesses the impact of the monetary
integration on different types of stock returns in Europe. In order to
isolate European factors, the impact of global equity integration and small
cap factors are investigated. European countries are sub-divided according
to the process of monetary convergence. Analysis shows that national equity
indices are strongly influenced by global market movements, with a European
stock factor providing additional explanatory power. The global and European
factors explain small cap and real estate stocks much less well –suggesting
an increased importance of ‘local’ drivers. For real estate, there are
notable differences between core and non-core countries. Core European
countries exhibit convergence – a convergence to a European rather than
a global factor. The non-core countries do not seem to exhibit common trends
or movements. For the non-core countries, monetary integration has been
associated with increased dispersion of returns, lower correlation and
lower explanatory power of a European factor. It is concluded that this
may be explained by divergence in underlying macro-economic drivers between
core and non-core countries in the post-Euro period.
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