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Tenant Industry Sector and European Listed Real Estate Performance

Author

Listed:
  • Jan Muckenhaupt

    (Technische Universität München (TUM))

  • Martin Hoesli

    (University of Geneva - Geneva School of Economics and Management (GSEM); Swiss Finance Institute; University of Aberdeen - Business School)

  • Bing Zhu

    (Technische Universität München (TUM))

Abstract

This paper is the first to examine the relationship between the performance of public real estate companies (PRECs) and the industrial sector of their tenants. By investigating the performance of a large sample of European real estate firms from 2010 to 2019 and information pertaining to the firms' tenants, we find that the systematic risk in the tenants' industry sectors is priced in real estate company equity returns. Our results stay robust after correcting for selection bias, stock beta modifications, tenant sector alpha, and tenant anchor effects. We propose a long-short hedging strategy that buys the stocks with high tenant sector risk and sells the stocks with low tenant sector risk, which can earn a non-market return of 3.53% annually.

Suggested Citation

  • Jan Muckenhaupt & Martin Hoesli & Bing Zhu, 2022. "Tenant Industry Sector and European Listed Real Estate Performance," Swiss Finance Institute Research Paper Series 22-08, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2208
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    More about this item

    Keywords

    Public Real Estate Companies; Listed Real Estate; Tenants; Industry Sector; Systematic Risk;
    All these keywords.

    JEL classification:

    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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