Risk and credit change in Asian securitized real estate market

The existence of bubbles has long been vigorously debated in the academia. Recent efforts have concentrated on the development of models for detecting bubbles, a topic which has yet to reach a consensus among researchers. To provide a more reliable and accurate approach to measure bubbles, we establish a novel method to disentangle the bubble phenomena in securitized property markets: two new specific indicators are introduced to measure (i) the magnitude of bubbles (CM) and (ii) the riskiness of a bubbled market (β). The findings suggest that converging co-integrations between Asian markets are always accompanied by the formation of bubbles. As loose credit leads to a booming market, bubbles appear with a rebounding risk-free rate, and lifts up the β. Changes in credit could be considered a significant indicator of bubbles booming. In this respect, this study provides important implications for both investors and governments. Particularly, it could serve as a reference for relevant authorities regarding market risk.