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The Role of Co-skewness in the Pricing of Real Estate

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  • Liu, Crocker H
  • Hartzell, David J
  • Grissom, Terry V
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    Abstract

    The current study investigates whether systematic skewness offers an alternative perspective as to why the risk-adjusted returns on real estate should be similar to that for stocks. This is not a trivial issue since an affirmative finding implies that the authors might be incorrectly measuring real estate risk from both a pricing and a portfolio allocation perspective. A multivariate test of the A. Kraus-R. Litzenberger (1976) model is used to investigate this skewness proposition with the K-L CAPM tested against several alternative versions of the CAPM. The study finds that the Kraus-Litzenberger model offers additional insights into the measurement of real estate risk. Evidence is also found that both the zero beta and the consumption-oriented CAPM hold, which is consistent with the recent literature in real estate. Copyright 1992 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Real Estate Finance & Economics.

    Volume (Year): 5 (1992)
    Issue (Month): 3 (September)
    Pages: 299-319

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    Handle: RePEc:kap:jrefec:v:5:y:1992:i:3:p:299-319

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    Web page: http://www.springerlink.com/link.asp?id=102945

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    Cited by:
    1. Ping Cheng, 2004. "Asymmetric Risk Measures and Real Estate Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 30(1), pages 89-102, October.
    2. Thomas C. Chiang & Hooi Hooi Lean & Wing-Keung Wong, 2008. "Do REITs Outperform Stocks and Fixed-Income Assets? New Evidence from Mean-Variance and Stochastic Dominance Approaches," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 1(1), pages 1-40, December.
    3. Michael S. Young & Richard A. Graff, 1996. "Systematic Behavior in Real Estate Investment Risk: Performance Persistence in NCREIF Returns," Journal of Real Estate Research, American Real Estate Society, vol. 12(3), pages 369-382.
    4. Timothy W. Vines & Cheng-Ho Hsieh & John J. Hatem, 1994. "The Role of Systematic Covariance and Coskewness in the Pricing of Real Estate: Evidence from Equity REITs," Journal of Real Estate Research, American Real Estate Society, vol. 9(4), pages 421-430.

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