PRICE DISCOVERY AND VOLATILITY TRANSMISSION IN AUSTRALIAN REIT CASH AND FUTURES MARKETS

This study examines the price discovery function and volatility spillovers in Australian real estate investment trust (A-REIT) index futures and also investigates the effects of the global financial crisis (GFC) on these two features. As opposed to the general understanding of the relationship between the cash and the futures markets, the current study finds that the A-REIT cash market led the A-REIT futures market in price discovery and volatility transmission processes before the GFC. However, during the GFC, the two markets interacted bilaterally in terms of information flow, i.e., information flowed in both directions. Furthermore, after the GFC, the futures market followed the cash market again, but less closely. These findings have broad implications for investors in property assets.