What Factors Determine International Real Estate Security Returns?
In this paper, we use constrained cross-section regressions to disentangle the effects of various factors on real estate security returns in 21 countries. A better knowledge of the risk factors driving real estate returns is crucial, whether a pure real estate portfolio is constructed, or whether real estate is considered as an alternative asset class within the traditional stock portfolio. Besides a common factor, “pure” country, size, and value/growth factors are considered. The value/growth measure that is used in this paper is a unique indicator developed by Salomon Smith Barney (SSB). It provides for each stock the relative importance of the value and growth components, rather than using a binary classification. The value/growth factor is found to have a substantial and increasing effect on returns over the analyzed period February 1990-April 2002. Country factors are important determinants of real estate security returns also. Statistical analysis of the residuals indicates that additional “hidden” factors most likely exist. These statistical factors are shown to explain about one third of specific returns on international real estate securities. Nevertheless, as is the case for traditional stock portfolios, stock picking keeps all its importance for real estate stocks as well.
|Date of creation:||15 Sep 2002|
|Date of revision:|
|Publication status:||Published in Real Estate Economics, 2004, pages 437-462.|
|Contact details of provider:|| Postal: Institute for Financial Research Drottninggatan 89, SE-113 60 Stockholm, Sweden|
Web page: http://www.sifr.org/
More information through EDIRC
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.:
- Banz, Rolf W., 1981. "The relationship between return and market value of common stocks," Journal of Financial Economics, Elsevier, vol. 9(1), pages 3-18, March.
- Alan J. Ziobrowski & Brigitte J. Ziobrowski & Sidney Rosenberg, 1997. "Currency Swaps and International Real Estate Investment," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 25(2), pages 223-251.
- Youguo Liang & Arjun Chatrath & Willard McIntosh, 1996. "Apartment REITs and Apartment Real Estate," Journal of Real Estate Research, American Real Estate Society, vol. 11(3), pages 277-290.
- Simon Stevenson, 2000. "International Real Estate Diversification: Empirical Tests using Hedged Indices," Journal of Real Estate Research, American Real Estate Society, vol. 19(1), pages 105-131.
- Heston, Steven L. & Rouwenhorst, K. Geert, 1994. "Does industrial structure explain the benefits of international diversification?," Journal of Financial Economics, Elsevier, vol. 36(1), pages 3-27, August.
- Crocker H. Liu & Jianping Mei, 1998.
"The Predictability of International Real Estate Markets, Exchange Rate Risks and Diversification Consequences,"
Real Estate Economics,
American Real Estate and Urban Economics Association, vol. 26(1), pages 3-39.
- Crocker Liu & Jianping Mei, 1996. "The Predictability of International Real Estate Markets, Exchange Rate Risks and Diversification Consequences," New York University, Leonard N. Stern School Finance Department Working Paper Seires 96-33, New York University, Leonard N. Stern School of Business-.
- Graeme Newell & James R. Webb, 1996. "Assessing Risk for International Real Estate Investments," Journal of Real Estate Research, American Real Estate Society, vol. 11(2), pages 103-116.
- Ling, David C & Naranjo, Andy, 2002. "Commercial Real Estate Return Performance: A Cross-Country Analysis," The Journal of Real Estate Finance and Economics, Springer, vol. 24(1-2), pages 119-42, Jan.-Marc.
- Piet Eichholtz & Ronald Huisman & Kees Koedijk & Lisa Schuin, 1998. "Continental Factors in International Real Estate Returns," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(3), pages 493-509.
- Terence Khoo & David Hartzell & Martin Hoesli, 1993. "An Investigation of the Change in Real Estate Investment Trust Betas," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 21(2), pages 107-130.
- Piet M.A. Eichholtz, 1996. "The Stability of the Covariances of International Property Share Returns," Journal of Real Estate Research, American Real Estate Society, vol. 11(2), pages 149-158.
- Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-65, June.
When requesting a correction, please mention this item's handle: RePEc:hhs:sifrwp:0007. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anki Helmer)
If references are entirely missing, you can add them using this form.