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Italian real estate investment funds: market structure and risk measurement

Author

Listed:
  • Michele Leonardo Bianchi

    () (Banca d'Italia)

  • Agostino Chiabrera

    () (Banca d'Italia)

Abstract

This paper describes the Italian real estate investment funds industry, providing an overview of the distinctive features and risk factors of this sector. By using accounting and supervisory data, we: (1) compute the returns of the real estate assets in the portfolio of these funds; (2) construct a price index and a total return index of the real estate assets held by the Italian funds; (3) define a risk assessment process based on three different aspects - their financial profile, income structure and property price behaviour. This analysis allows us to select funds with a weak financial structure, poor returns, and a high probability that in a three-year interval their property portfolio will fall below their net liabilities (defined as the difference between debt and liquid assets). The proposed risk assessment can be seen as the first step towards a more intensive supervisory analysis and can also be useful for investment purposes.

Suggested Citation

  • Michele Leonardo Bianchi & Agostino Chiabrera, 2012. "Italian real estate investment funds: market structure and risk measurement," Questioni di Economia e Finanza (Occasional Papers) 120, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:opques:qef_120_12
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    File URL: http://www.bancaditalia.it/pubblicazioni/qef/2012-0120/QEF_120.pdf
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    References listed on IDEAS

    as
    1. Giacomo Morri & Stephen Lee, 2008. "The Performance Of Italian Real Estate Funds," ERES eres2008_212, European Real Estate Society (ERES).
    2. Martin Hoesli & Elion Jani & André Bender, 2005. "Monte Carlo Simulations for Real Estate Valuation," FAME Research Paper Series rp148, International Center for Financial Asset Management and Engineering.
    3. James Kau & Donald Keenan & Yildiray Yildirim, 2009. "Estimating Default Probabilities Implicit in Commercial Mortgage Backed Securities (CMBS)," The Journal of Real Estate Finance and Economics, Springer, vol. 39(2), pages 107-117, August.
    4. Christina E. Bannier & Falko Fecht & Marcel Tyrell, 2008. "Open-End Real Estate Funds in Germany – Genesis and Crisis," Credit and Capital Markets, Credit and Capital Markets, pages 9-36.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    real estate investment funds; asset management; firm value model; non-normal distributions; Monte Carlo simulation;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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