Commercial Real Estate Return Performance: A Cross-Country Analysis

This paper investigates the return performance of publicly traded real estate companies. The analysis spans the 1984–1999 time period and includes return data on over 600 companies in 28 countries. The return data reveal a substantial amount of variation in mean real estate returns and standard deviations across countries. Moreover, standard Treynor ratios, which scale country excess returns by the estimated beta on the world wealth portfolio, also reveal substantial variation across countries in excess real estate returns per unit of systematic risk. However, when we estimate Jensens alphas using both single and multifactor specifications, we detect little evidence of abnormal, risk-adjusted returns at the country level. We do, however, find evidence of a strong world-wide factor in international real estate returns. Furthermore, even after controlling for the effects of world-wide systematic risk, an orthogonalized country-specific factor is highly significant. This suggests that real estate securities may provide international diversification opportunities.     

Economic Risk Factors and Commercial Real Estate Returns

A great deal of research has focused on the links between stock and bond market returns and macroeconomic events such as fluctuations in interest rates, inflation rates, and industrial production. Although the comovements of real estate and other asset prices suggests that these same systematic risk factors are likely to be priced in real estate markets, no study has formally addressed this issue. This study identifies the growth rate in real per capita consumption, the real T-bill rate, the term structure of interest rates, and unexpected inflation as fundamental drivers or state variables that systematically affect real estate returns. The finding of a consistently significant risk premium on consumption has important ramifications for the vast literature that has examined the (risk-adjusted) performance of real estate, for it suggests that prior findings of significant abnormal returns (either positive or negative) that have ignored consumption are potentially biased by an omitted variables problem. The results also have important implications for dynamic asset allocation strategies that involve the predictability of real estate returns using economic data.     

Some Tests of the Risk-Return Relationship Using Alternative Asset Pricing Models and Observed Expected Returns

This study examines the performance of three asset pricing models: the CAPM, the APT and the UAPT using observed expected returns from a three-phase dividend discount model with Value Line analyst estimates of future company-level earnings, dividends and growth rates. Our study is the first we know of to test the three major asset pricing models using observed expected returns. Our results are similar to prior research using ex post (realized) returns in that we find that the UAPT using macroeconomic factors is the best performing model, followed by the APT and the CAPM. However, our results also suggest that the importance of macroeconomic factors is much greater to expected returns than to realized returns, and the corresponding R2 values for models using expected returns are much higher than for models using realized returns. Combining our results for the UAPT with those of Marston and Harris (1993) for the CAPM suggests that these models are more successful in tests using observed expected returns than in tests using realized returns as proxies for expected returns. Unit root tests suggest that monthly observed expected returns follow the classic random walk without drift model while monthly realized returns do not.     

The Relative Importance of Stock, Bond and Real Estate Factors in Explaining REIT Returns

This paper examines the link between REIT, financial asset and real estate returns, and tests whether it changed subsequent to the “REIT boom” of the early 1990s. The main focus is on answering the question do REIT returns now better reflect the performance of underlying direct (unsecuritized) real estate? We develop and implement a variance decomposition for REIT returns that separates REIT return variability into components directly related to major stock, bond, and real estate-related return indices, as well as idiosyncratic or sector-specific effects. This is applied to aggregate REIT sector (NAREIT) returns as well as returns to size and property-type based REIT portfolios. Our results show that the REIT market went from being driven largely by the same economic factors that drive large cap stocks through the 1970s and 1980s to being more strongly related to both small cap stock and real estate-related factors in the 1990s. There is also a steady increase over time in the proportion of volatility not accounted for by stock, bond or real estate related factors. We also find that small cap REITs are “more like real estate” compared to larger cap REITs, at least over the 1993–1998 period. We argue that this could be a result of the institutionalization of the ownership of larger cap REITs that took place in the 1990s.     

Unsmoothing Commercial Property Returns: A Revision to Fisher–Geltner–Webb's Unsmoothing Methodology

Fisher, Geltner, and Webb (1993), in a highly influential paper, develop a procedure to recover the underlying market values from a smoothed valuation-based commercial property return index, without assuming that the underlying property market is informationally efficient. Many papers since then have used the Fisher–Geltner–Webb unsmoothing technique to desmooth commercial property returns. We show, however, that there is an inherent bias in Fisher–Geltner–Webb unsmoothing technique and propose a simple extension of their model to correct for this bias. We then compare the performance of our improved specification to that of the Fisher–Geltner–Webb model.     

行为如何影响资产定价——理论模型与实证分析

本文基于金融经济学中状态价格与随机折现因子等理论的分析,认为资产定价会受到行为因素的影响.在此基础上本文提出了状态价格函数,并建立了行为影响资产定价的多项式模型.     

Asymmetric Information and the Predictability of Real Estate Returns

This article examines the relation between systematic price changes and the heterogeneity of investors information sets in real estate asset markets. The empirical implications rely on a theoretical economy in which information asymmetry alters the dynamic relation between returns and trading volume. We employ a filter-rule methodology to determine predictability in returns and augment the return-based conditioning set with trading volume. The additional conditioning information is necessary since the model is underspecified when predictability is based on returns alone. Our results provide new insight into the coexistence of informational and noninformational exchange in the speculative markets for real estate assets. Specifically, we find that the predictability of real estate returns is generally more indicative of portfolio rebalancing effects than an adverse-selection problem. These results are unique in addressing the time-variation in information asymmetry.     

A Pricing Framework for Real Estate Derivatives

New methods are developed here for pricing the main real estate derivatives — futures and forward contracts, total return swaps, and options. Accounting for the incompleteness of this market, a suitable modelling framework is outlined that can produce exact formulae, assuming that the market price of risk is known. This framework can accommodate econometric properties of real estate indices such as predictability due to autocorrelations. The term structure of the market price of risk is calibrated from futures market prices on the Investment Property Databank index. The evolution of the market price of risk associated with all five futures curves during 2009 is discussed.     

Credit Availability and Asset Pricing Dynamics in Illiquid Markets: Evidence from Commercial Real Estate Markets

This article examines credit frictions and asset pricing in public and private markets with varying liquidity. We find that a tightening in credit availability is negatively related to subsequent price movements in private and public commercial real estate markets. Assets trading in illiquid segments of these markets are also susceptible to a feedback effect whereby changes in asset prices predict subsequent changes in credit availability. Controlling for investor demand, our findings suggest credit constraints play an economically significant asset pricing role in markets that are both highly levered and relatively illiquid.     

Capital Asset Pricing Model and Stochastic Volatility: A Case Study of India

The existing literature demonstrates that under a general equilibrium model, the performance of the Capital Asset Pricing Model (CAPM) can be improved significantly by using conditional consumption and market return volatilities as factors. This article tests the validity of these factors explaining stock return differences using a less developed country (India) as a case study. While the earlier studies used panel data to test CAPM, we use portfolios sorted by size and book-to-market equity (BE/ME) ratio. We found that conditional volatility has a limited effect on firms with large capitalization but a significant impact on small-growth and small-value firms.     

The Conditional Distribution of Real Estate Returns: Are Higher Moments Time Varying?

Previous research has shown that the returns on individual properties and listed property securities are skewed. This claim is investigated in the context of listed U.K. property companies and U.S. REITs. In particular, the shape of the conditional distribution of total monthly returns is examined for a group of 20 U.K. companies and 20 REITs. Also investigated is the claim that the skewness found in property returns varies over time. Using the model of Hansen (1994), it is found that while a large portion of property security returns in the sample do exhibit skewness in the conditional distribution only in a few instances is there time variation in the skewness parameter. There is little evidence to suggest that skewness is associated with the economic cycle.     

Net Asset Value Discounts for Asian-Pacific Real Estate Companies: Long-Run Relationships and Short-Term Dynamics

This study investigates the time series behavior of real estate company net asset value discount/premium (NAVDISC) in eight Asian-Pacific securitized real estate markets from 1995 to 2003. We postulate that if there is a stable NAVDISC for real estate companies in the long-run, then there should be a long-run cointegrating relation between their stock prices (Ps) and net asset values (NAVs). Employing panel data cointegration econometrics that comprises three approaches; panel unit root test, heterogeneous panel cointegration test and dynamic panel error-correction modeling (ECM), we find that long run NAVDISCs persist in individual Asian-Pacific securitized real estate markets and the regional market. All the NAVDISCs exhibit mean reversion and that the respective disequilibrium errors fluctuate around the mean values. Moreover, NAV is an important factor that statistically explains the price variations in real estate stock prices regardless of their speed of mean-reversion in the NAV discount /premium.     

Arbitrage and the Evaluation of Linear Factor Models in UK Stock Returns

I examine the impact of the no arbitrage restriction on the estimation and evaluation of linear factor models in UK stock returns. The no arbitrage restriction reduces volatility and eliminates most of the negative values of the fitted stochastic discount factor models. All of the factor models are rejected and there are significant differences in the pricing performance between models under the no arbitrage restriction. The no arbitrage restriction can have a significant impact on both the parameter estimates and pricing errors for some models.     

不动产证券化在城市更新中的应用研究

不动产证券化被引入城市更新中具有诸多优势,这也是解决当前城市更新困境的有效途径之一。本文首先利用SWOT分析法研究不动产证券化在城市更新中的应用,然后探讨不动产证券化的最新发展类型——开发型不动产证券化的运作模式,最后对我国利用不动产证券化促进城市更新提出政策建议。     

Equality of Real Returns on Canadian and US Treasury Bills: A Fractional Cointegration Analysis

This paper empirically analyzes the long memory relationship between the real returns on Canadian and US Treasury bills. A fractional cointegration approach, instead of conventional integer integration (unit root) and cointegration approaches, is used in analyzing the relationship. The advantage of fractionally integrated models is that they allow a smooth transition from a stationary process to a unit-root process. Furthermore, such models embody unit-root models as a special case. The models are therefore more general and appropriate for empirical analysis. By using fractionally integrated models, one also resolves the problems of an inconsistency in test results associated with using unit root and cointegration approaches. Briefly, it is found that the real returns on Canadian and US Treasury bills are fractionally integrated and the order of integration is significantly less than unity. Furthermore, the difference between the real returns follows a stationary process. This indicates that the Canadian and the US capital markets as well as product markets are well integrated. Furthermore, the domestic monetary authorities will not be able to influence the domestic real interest rate independent of the other market in the long-run.     

Asset Bubbles: an Application to Residential Real Estate

Behavioural models offer new insights into why bubbles are ubiquitous in residential real estate markets. These markets are dominated by unsophisticated households who often develop optimistic views by extrapolating from past returns. Rational investors cannot easily trade against an overvaluation of housing assets because of high transaction costs and a binding short sale constraint. Circumventing the effect of the latter, the supply of housing frequently increases in response to rising prices. This helps to mitigate bubbles but often leads to overbuilding, which slows down the recovery after a bubble bursts. Models that incorporate the effects of perverse incentives and limits to arbitrage are especially helpful in explaining the bubble that developed in mortgage‐backed securities and helped fuel the recent real estate bubble by relaxing home buyers’ borrowing constraints. The literature is ambiguous about whether governments should intervene to burst bubbles, as a better response may lie in improving incentives of key market players.     

Conditional Volatility of Equity Real Estate Investment Trust Returns: A Pre- and Post-1993 Comparison

We examine the dynamic behavior of Equity Real Estate Investment Trust (EREIT) volatility in a GARCH context 1972–2006 using monthly EREIT returns, and comparing volatility performance for “early” Equity REITs 1972–1992 with that of “modern” EREITs 1993–2006. Consistent with findings for conventional firms, we find that EREIT conditional volatility is time-varying, persistent, and predictable. There is a positive relationship between expected return and expected risk in EREIT stocks pre-1993, but the relationship disappears after 1993. We find no evidence that negative shocks affect EREIT volatility differently from positive ones in either time period. Different from reported results for conventional firms, we find that changes in the conditional volatility of fundamental macroeconomic variables have strong explanatory value for future changes in EREIT volatility. Finally, comparing EREIT volatility performance with volatility in the Russell 2000 Index, a proxy for small stocks, we find that EREIT volatility behaves differently from that of small stocks in many respects, indicating that risks in the small stock index cannot effectively proxy for risks in the EREIT market.

A Note on the Earnings of Real Estate Salespersons and others in the Financial Services Industry

The earnings of females in various sales professions are less than their male counterparts. By expanding on the set of variables used by Jud and Winkler we were able to explain a large portion of this differential for most professions. Child rearing and marriage explain much of the differential in income in business sales outside of real estate. These variables fail to explain the remaining large gap in real estate sales, however.     

物业税开征的先决条件之一:房地产产权制度的改革与完善

明晰的房地产产权关系以及相应完善的管理制度是开征物业税不可缺少的重要条件。本文探讨了物业税与房地产产权管理的一般关系,针对我国房地产产权管理现状存在的问题,提出了开展房地产产权登记普查、逐步统一城乡房地产产权管理制度等政策建议。     

A general framework for the derivation of asset price bounds: an application to stochastic volatility option models

We present a generalization of Cochrane and Saá-Requejo’s good-deal bounds which allows to include in a flexible way the implications of a given stochastic discount factor model. Furthermore, a useful application to stochastic volatility models of option pricing is provided where closed-form solutions for the bounds are obtained. A calibration exercise demonstrates that our benchmark good-deal pricing results in much tighter bounds. Finally, a discussion of methodological and economic issues is also provided.