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On Demand: Cross-Country Evidence From Commercial Real Estate Asset Markets

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  • Steven H. Ott

    ()
    (Belk College of Business and Administration University of North Carolina at Charlotte)

  • Timothy J. Riddiough

    ()
    (School of Business University of Wisconsin – Madison)

  • Ha-Chin Yi

    ()
    (McCoy College of Business Administration Texas State University-San Marcos)

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    Abstract

    Using over 25 years of quarterly U.S. and Japanese time series data, this paper examines the determinants of demand for an important class of real assets: commercial real estate. We specify a structural model of market equilibrium that considers direct effects of real investment on built asset price. Our empirical findings are consistent across countries and produce several new results. First, we find that real investment exerts a significant positive direct effect on asset price, which in turn feeds back to impact investment decisions. Second, idiosyncratic risk is found to be strongly positively related to asset price, and to complement supply effects. Third, systematic risk is priced as expected, where the strength of the relation between asset price and systematic risk is found to be higher than in previous studies of capital asset prices. Fourth, lagged values of price determinants (of up to two years) are consistently important in real asset demand estimation. Alternative explanations for our findings are analyzed and discussed. Implications for asset pricing model specification and interpretation are also considered.

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    Bibliographic Info

    Article provided by Asian Real Estate Society in its journal International Real Estate Review.

    Volume (Year): 11 (2008)
    Issue (Month): 1 ()
    Pages: 1-37

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    Handle: RePEc:ire:issued:v:11:n:01:2008:p:1-37

    Contact details of provider:
    Postal: Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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    Web page: http://www.asres.org/

    Order Information:
    Postal: Asian Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
    Email:
    Web: http://www.asres.org/

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    Keywords: equity REIT; IPO; interest-rate sensitivity; risk-adjusted return performance;

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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