Cross-market Volatility Transmission and Correlation Dynamics Between Real Estate and Financial Markets: Evidence from India

This study investigates the volatility spillovers and dynamic conditional correlations (DCCs) among the Nifty Realty Index, Indian government bonds, commodities index and exchange rate, utilizing Baba–Engle–Kraft–Kroner (BEKK)–generalized autoregressive conditional heteroskedasticity (GARCH) and DCC–GARCH models. The results indicate that the real estate sector plays a pivotal role in propagating shocks, particularly during periods of heightened uncertainty such as the COVID-19 pandemic and geopolitical conflicts. The findings highlight short-term volatility spillovers, underscoring the interrelation between the real estate market and commodity prices, as well as macroeconomic stability. The results correspond with recent research indicating increased interconnection and heightened housing market volatility during adverse conditions. These observations have significant implications for policymakers and investors, underscoring the need for targeted macroprudential measures, portfolio diversification and hedging strategies to mitigate systemic risk in the Indian financial system. This study examines the impact of the real estate sector on financial market dynamics, thereby expanding the existing literature on cross-market volatility spillovers and laying the groundwork for future research on the effect of real estate on asset pricing and economic stability. JEL Codes: C58, G10, G11