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Macroeconomic risk factors in Australian commercial real estate, listed property trust and property sector stock returns: A comparative analysis using GARCH-M

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  • Tracey West
  • Andrew C. Worthington

Abstract

This paper employs a Generalised Autoregressive Conditional Heteroskedasticity in Mean (GARCH-M) model to consider the effect of macroeconomic factors on Australian property returns over the period 1985 to 2002. Three direct (office, retail and industrial property) and two indirect (listed property trust and property stock) returns are included in the analysis, along with market returns, short, medium and long-term interest rates, expected and unexpected inflation, construction activity and industrial employment and production. In general, the macroeconomic factors examined are found to be significant risk factors in Australian commercial property returns. However, the results also indicate that forecast accuracy in these models is higher for direct office, listed property trust and property stock returns and that the persistence of volatility shocks varies across the different markets, with volatility half lives of between five and seven months for direct retail and industrial property, two and three months for direct office property and less than two months with both forms of indirect property investment.

Suggested Citation

  • Tracey West & Andrew C. Worthington, 2003. "Macroeconomic risk factors in Australian commercial real estate, listed property trust and property sector stock returns: A comparative analysis using GARCH-M," School of Economics and Finance Discussion Papers and Working Papers Series 160, School of Economics and Finance, Queensland University of Technology.
  • Handle: RePEc:qut:dpaper:160
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    File URL: http://external-apps.qut.edu.au/business/documents/discussionPapers/2003/DP%20160%20West%20&%20Worthington.pdf
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    References listed on IDEAS

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    Cited by:

    1. Faisal Khan & Saif-Ur-Rehman Khan & Hashim Khan, 2016. "Pricing of Risk, Various Volatility Dynamics and Macroeconomic Exposure of Firm Returns: New Evidence on Age Effect," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 551-561.

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