International diversification benefits -a view on time-varying European market integration


  • Carpantier Jean-Francois
  • Sapata Christelle

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National real estate markets are usually considered to be segmented one from the other. International diversification benefits in real estate markets have been shown to be larger than those in equity or bond markets. New developments in Europe (single market , monetary union, post-crisis coordination of macroprudential policies) are expected to increase integration and reduce these benefits. We study the time-varying degree of integration of European real estate markets over 1971-2018 by estimating the explanatory power of a multi-factor linear model. We find that the integration was relatively stable over time, with a temporary rise during the 2008 financial crisis. We also note that the integration dynamics within Europe has not become stronger than with non-European countries. We find that countries are individually highly integrated via the global factors excepted during short-lived events. The data do not detect stable regional clusters. The international diversification of real estate investments still matters.

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