Real estate as a new equity market sector: Market responses and return comovement

Abstract

This study examines the market responses and return comovement between real estate and financial stocks around the reclassification of real estate firms from the financial sector to a standalone new real estate sector. We find that real estate stocks experience positive abnormal returns at the announcement of new sector creation, and attract more investor attention after the announcement. In addition, the comovement between real estate and finan- cial stocks decreases dramatically after the new sector cre-ation. These findings demonstrate the market impact of new real estate sector creation and provide important impli-cations for real estate investors, portfolio managers, and policy makers.