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Title: Feedback trading strategies in international real estate markets
Authors: Balomenou, Chrysanthi
Babalos, Vassilios
Vortelinos, Dimitrios I.
Koulakiotis, Athanasios
Type: Article
Subjects: FRASCATI::Social sciences
Keywords: GARCH
Real estate markets
Feedback trading
Long-memory volatility
Securitized prices
Issue Date: 1-Apr-2021
Source: International Journal of Housing Markets and Analysis
Volume: 14
Issue: 2
First Page: 394
Last Page: 409
Abstract: Purpose Motivated by recent evidence that securitized real estate returns exhibit higher levels of predictability than stock market returns and that feedback trading (FT) can induce returns autocorrelation and market volatility, the purpose of this study is to examine the impact of FT strategies on long-term market volatility of eight international real estate markets (UK, Germany, France, Italy, Sweden, Australia, Japan and Hong Kong). Design/methodology/approach Assuming that the return autocorrelation may vary over time and the impact of positive feedback trading (PFT) or negative feedback trading (NFT) could be a function of return volatility, the authors use a combination of a FT model and a fractionally integrated Generalized AutoRegressive Conditional Heteroskedasticity (GARCH) model. Findings The results are mixed, revealing that both PFT and NFT strategies persist. Specifically, the authors detect PFT in the real estate markets of France, Hong Kong and Italy as opposed to the real estate markets of Australia, Germany, Japan and Sweden where NFT was present. A noteworthy exception is the UK real estate market, with important and rational FT strategies to sustain. With respect to the long-term volatility persistence, this seems to capture the mean reversion of real estate returns in the UK and Hong Kong markets. In general, the results are not consistent with those reported in previous studies because NFT dominates PFT in the majority of real estate markets under consideration. Originality/value The main contribution of this study is the investigation of the link between short-term PFT or NFT and long-term volatility in eight international real estate markets, symmetrically. Particular attention has been given to the link between short-term FT and long-term volatility, by means of a fractionally integrated GARCH approach, a symmetric one. Moreover, investigating the relationship between returns’ volatility and investors’ strategies based on FT entails significant implications because real estate assets offer a good alternative investment for many investors and speculators.
ISSN: 1753-8270
Other Identifiers: 10.1108/IJHMA-04-2020-0041
Appears in Collections:Department of Balkan, Slavic & Oriental Studies

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