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Abstract

This paper examines the dependence in irrational sentiments across housing, commercial property, and stock markets. Our empirical results document an important and lasting impact that commercial real estate sentiment and returns have on broader financial markets. We also show that the cross-over effects of market sentiments are not consistent with cross-over effects in market returns. Sentiments and returns in housing and stock markets exhibit strong dependence on other markets, whereas they evolve independently in commercial real estate. While housing and stock market returns respond to irrational sentiment in commercial real estate markets, the opposite is not true.

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