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Style Analysis in Real Estate Markets: Beyond the Sectors and Regions Dichotomy


  • Franz Fuerst

    () (School of Real Estate & Planning, University of Reading Business School)

  • Gianluca Marcato

    () (School of Real Estate & Planning, University of Reading)


While style analysis has been studied extensively in equity markets, applications of this valuable tool for measuring and benchmarking performance and risk in a real estate context are still relatively new. Most previous real estate studies on this topic have identified three investment categories (rather than styles): sectors, administrative regions and economic regions. However, the low explanatory power reveals the need to extend this analysis to other investment styles. We identify four main real estate investment styles and apply a multivariate model to randomly generated portfolios to test the significance of each style in explaining portfolio returns. Results show that significant alpha performance is significantly reduced when we account for the new investment styles, with small vs. big properties being the dominant one. Secondly, we find that the probability of obtaining alpha performance is dependent upon the actual exposure of funds to style factors. Finally we obtain that both alpha and systematic risk levels are linked to the actual characteristics of portfolios. Our overall results suggest that it would be beneficial for real estate fund managers to use these style factors to set benchmarks and to analyze portfolio returns.

Suggested Citation

  • Franz Fuerst & Gianluca Marcato, 2009. "Style Analysis in Real Estate Markets: Beyond the Sectors and Regions Dichotomy," Real Estate & Planning Working Papers rep-wp2009-01, Henley Business School, Reading University.
  • Handle: RePEc:rdg:repxwp:rep-wp2009-01

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    References listed on IDEAS

    1. MacKinnon, James G. & White, Halbert & Davidson, Russell, 1983. "Tests for model specification in the presence of alternative hypotheses : Some further results," Journal of Econometrics, Elsevier, vol. 21(1), pages 53-70, January.
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    Cited by:

    1. Jaroslaw Morawski & Tom van den Heuvel, 2013. "Performance Drivers of German Institutional Property Funds," ERES eres2013_221, European Real Estate Society (ERES).
    2. Brett Robinson, 2012. "How many leases are enough to diversify a portfolio of multi-let industrial properties?," ERES eres2012_351, European Real Estate Society (ERES).
    3. repec:kap:jrefec:v:56:y:2018:i:1:d:10.1007_s11146-016-9579-7 is not listed on IDEAS

    More about this item


    investment styles; commercial real estate; portfolio analysis; performance measurement;

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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