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Risk Characteristics of Real Estate Related Securities--An Extension of Liu and Mei (1992)

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Abstract

This study extends from Liu and Mei (1992) by further investigation of assets, real estate related securities, which includes both equity and mortgage real estate investment trusts (REITs), the stocks of builder- and owner-companies, and mortgage-backed securities (MBSs). There are five major findings. First, expected excess returns of real estate related securities are more predictable than the expected excess returns of value-weighted stocks and bonds. Second, right market timing is important to investors since evidence shows that the risk premiums of real estate related securities vary substantially over time. Third, real estate market conditions significantly influence bonds and MBSs. Fourth, MBSs are more similar to bonds than mortgage REITs. In addition, returns on mortgage REITs resemble both stocks and bonds. Finally, real estate stocks have a very high sensitivity toward stock market portfolio. This suggests that real estate stocks are not good instruments to help diversify stock risk.

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  • Hsien-hsing Liao & Jianping Mei, 1998. "Risk Characteristics of Real Estate Related Securities--An Extension of Liu and Mei (1992)," Journal of Real Estate Research, American Real Estate Society, vol. 16(3), pages 279-290.
    • Handle: RePEc:jre:issued:v:16:n:3:1998:p:279-290
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    Cited by:

    1. Riza Demirer & Rangan Gupta & Asli Yuksel & Aydin Yuksel, 2020. "The US Term Structure and Return Volatility in Global REIT Markets," Advances in Decision Sciences, Asia University, Taiwan, vol. 24(3), pages 84-109, September.
    2. Jieting Chen & Yuichiro Kawaguchi, 2018. "A Revisit of the Cross-Section of Overnight and Intraday Abnormal Returns: Evidence from the Japanese REIT Market," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(1), pages 46-63, January.
    3. Riza Demirer & Rangan Gupta & Asli Yuksel & Aydin Yuksel, 2020. "The US Term Structure and Return Volatility in Global REIT Markets," Advances in Decision Sciences, Asia University, Taiwan, vol. 24(3), pages 84-109, September.
    4. Felix Schindler, 2013. "Predictability and Persistence of the Price Movements of the S&P/Case-Shiller House Price Indices," The Journal of Real Estate Finance and Economics, Springer, vol. 46(1), pages 44-90, January.
    5. Felix Schindler, 2014. "Persistence and Predictability in UK House Price Movements," The Journal of Real Estate Finance and Economics, Springer, vol. 48(1), pages 132-163, January.
    6. Minye Zhang & Yongheng Deng, 2008. "REITs Return Behavior and Legal Infrastructure: The 1993 Revenue Reconciliation Act & Inspirations for China's Emerging REITS Market," Working Paper 8532, USC Lusk Center for Real Estate.

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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