REIT Capital Budgeting and Equity Marginal q

Equity marginal  q  is the change in the market value of a company's equity in response to a one-unit unexpected change in its asset base. Hence, it is a profitability index that evaluates a firm's capital budgeting decisions at the margin. We estimate the equity marginal  q  for real estate–managing public corporations, namely, real estate investment trusts (REITs), in an attempt to understand how the various costs and benefits of being a public corporation play a role in managing this important asset class. Using the universe of equity REITs for the period from 1993 to 2005, we find that REITs with greater idiosyncratic volatility, higher stock turnover and smaller bid-ask spread have a higher equity marginal  q . In addition, both the holdings of institutional investors and their investment horizons are respectively positively related to equity marginal  q.  With these firm characteristics taken into account, firm size is found to be negatively related to equity marginal  q . Our findings are economically important as well, because the equity marginal  q  ratio alone accounts for approximately one-third of the total REIT shareholder wealth change during the study period.     

REIT Stock Market Volatility and Expected Returns

We study the relation between REIT stock volatility and future returns, focusing particularly on the financial crisis period of 2007–2009. There is ongoing debate about whether stock volatility can forecast future returns. Our findings suggest that REIT‐implied volatility is negatively related to contemporaneous stock returns; there is a significant positive relationship between REIT implied volatility and future stock volatility; and there is a significant negative relation between REIT implied volatility and future stock returns. Lastly, we develop trading rules based on REIT implied volatility to test whether these relationships are exploitable. The result suggests a potentially profitable trading strategy.     

REIT Auditor Fees and Financial Market Transparency

This article examines the relationship between overinvestment in audit services, abnormal nonaudit fees paid to the auditor and market-based measures of firm transparency. Because real estate investment trusts (REITs) must distribute 90% of their earnings as dividends, many are repeat participants in the seasoned equity market. Thus, REITs have unusually strong incentives to strive for security market transparency. We find that the capital markets reward REITs that overinvest in audit services with better liquidity as measured by bid-ask spreads. However, firms with abnormally high nonaudit expenditures appear to be penalized with wider spreads, consistent with the notion that such fees may compromise auditor independence.     

Market Power,Efficiency and the Dispersion of Systematic Risk

A number of studies have used the Capital Asset Pricing Model (CAPM) to integrate product market and financial theories of the firm. We reexamine the relationship between product market structure and systematic risk at the firm and industry level. We show that theory yields no testable implications at the firm level. We show, however, that there is a relationship between the intraindustry dispersion of systematic risk and industry concentration which depends on the causes and consequences of concentration. Estimates of the relationship between the intraindustry variance of and concentration for a 1987 cross-section of U.S. industries suggest that concentration allows larger firms to exercise market power.     

Financial Flexibility and Investment: Evidence from REIT At‐the‐Market (ATM) Equity Offerings

This article examines changes in real estate investment around the establishment of at‐the‐market (ATM) equity programs by equity REITs. We document a significant increase in the rate of investment following an ATM program announcement and its subsequent use. However, we find that ATM access has a differential impact on the investment activity of REITs facing more significant financial constraints. We also provide further evidence that REITs with ATM programs generate positive long‐run returns in excess of that of similarly timed SEOs.     

The Role of the Underlying Real Asset Market in REIT IPOs

A leading explanation for IPO cycles is time-varying supply and demand for the underlying assets of the firms that are considering going public. We test this hypothesis using REIT IPOs, taking advantage of the relative transparency of the underlying real asset markets. We document links between REIT IPO activity and both the conditions of the underlying real estate market and the price of REITs. We find no significant relation between the heat of the IPO market and post-IPO operating performance, implying homogeneous firm quality across IPO cycles. Finally, we show that lagged IPO proceeds are related to future increases in investment and in capacity utilization.     

Labour Market Dualism and Diversification in Japan

The Japanese labour market has been regarded as ‘dualistic’ in terms of employment status (regular vs non‐regular). While it is true, this perspective misses recent changes in regular employment in terms of labour flexibility. The government has attempted labour market deregulation since the 1990s to increase the flexibility of not only non‐regular but also regular employment, and the labour market has become more diversified. Labour unions lack power resources to resist these neoliberal changes, however, because of their insufficient access to policy‐making, low union density and a lack of solidarity against the background of economic stagnation and competition under globalization.     

Wealth Effects of Diversification and Financial Deal Structuring: Evidence from REIT Property Portfolio Acquisitions

This study examines the strategic characteristics and shareholder wealth effects of a popular vehicle for Real Estate Investment Trust growth in the 1990s: the acquisition of a portfolio of properties from a single seller. We examine a sample of 209 REIT portfolio acquisitions during 1995-2001. We observe a wide variety of financing strategies and find an array of different categories of sellers. Contrary to results reported in real estate transactions of this sort in the past, we find that announcement-period shareholder returns are significantly positive in the aggregate. We present evidence that excess returns to acquirers result from (1) wealth benefits received when companies reconfirm their geographical focus in the acquisition, (2) positive information conveyed by the use of project-specific private debt and (3) a positive signal sent to the market when transactions are financed by stock privately placed with financial institutions.     

Performance of Pairs Trading Strategy in the U.S. REIT Market

We examine the performance of pairs trading in the U.S. REIT market compared with that in the U.S. general stock market over the period 1987 to 2008. The results suggest that the REIT market provided superior profit opportunities for this strategy over common stocks after accounting for the effect of the bid‐ask bounce between 1993 and 2000. This was likely because of the unique characteristics of REITs, which permitted the selection of good pairs of close substitutes and the structural changes that occurred in 1993 in the REIT market. The superior trading profits in REITs disappear after 2000.     

Risk and the Home Equity Conversion Mortgage

This article analyzes the risks involved with reverse mortgage insurance and explains the pricing model developed for the Home Equity Conversion Mortgage (HECM) demonstration. The paper demonstrates how borrower longevity, interest rates and property value changes all affect pricing, and why the HECM model focuses on property value as the primary source of uncertainty. It goes on to explain why a random walk specification was chosen to forecast property values, and how the principal limit factors, which determine cash payments to borrowers in the HECM program, are calculated.     

Diversification Benefits of REIT Preferred and Common Stock: New Evidence from a Utility‐based Framework

We study the diversification benefits of REIT preferred and common stock using a utility‐based framework in which investors segment based on risk aversion. We examine optimal mean‐variance portfolios of investors with different levels of risk aversion given access to different classes of assets and establish three main results. First, REIT common stock helps low risk aversion investors attain portfolios with higher returns, while REIT preferred stock helps high risk aversion investors by providing a venue for risk reduction. Second, REIT preferred stock has a risk‐return profile not easily replicated by other asset classes. Finally, conclusions drawn from the empirical analysis are markedly different under these constraints compared to the classical unconstrained setting.     

场外市场与私募股权投资退出

场外市场是沪深证券交易市场的有益补充,是建立多层次资本市场体系中的重要一极,由于其相对较低的进入门槛．在中小企业直接融资体系及企业资产要素流动中扮演着极为重要的角色,而私募股权投资基金则是场外市场的重要交易主体。文章着重论述了私募股权投资退出与场外市场是相互促进、相辅相成的关系,规范统一有序的场外市场为私募投资退出提供了广阔舞台,私募投资退出的顺畅又为场外市场注入了流动性活力。因此．当前形势下加强场外市场建设对于私募股权投资退出具有重要的现实意义。     

Option Trading and REIT Returns

This article examines the relation between option trading volume and real estate investment trust (REIT) market performance. Specifically, we find that option volume increases are followed by decreases in returns. Furthermore, the portion of option volume that is orthogonal to REIT characteristics drives the observed return predictability relation, thereby suggesting that the return predictability of option trading is (at least partially) attributable to information‐based explanations. Finally, consistent with informed traders favoring option market activities due to short‐sale costs and/or constraints, we find option based return predictability is more evident within REITs than non‐REITs, even though firms within this industry are generally viewed as informationally transparent.     

New Home Affordability, Equity, and Housing Market Behavior

Recent analyses have reported quite different estimates of the percentage of American families who can afford to buy new homes. However, the differences in the levels of affordability have obscured two more important similarities between the studies: most measures of affordability are closely correlated over time, and none correlate at all with what in fact is occurring in the housing market. One important reason for the latter phenomenon is that affordability measures concentrate on income and ignore wealth. Newly available data from the Annual Housing Survey makes it possible to estimate the equity of current homeowners, which is one important component of wealth. With this data, it is possible to compute a new measure of affordability, which more closely corresponds to the actual market behavior of households. This new measure shows a much higher level of affordability than those previously published, and also shows that young families, who have been the subject of particular concern among housing policy-makers, appear to be slightly better off in the housing market than older families.     

Uncertainty premia in REIT returns

We provide a systematic study of how financial and real estate uncertainty affect the aggregate return performance of the U.S. REIT market from 1994 to 2017. A temporal causality analysis reveals a negative uncertainty impact on REIT returns. The asset pricing analysis confirms the predictive relation and suggests that REITs are statistically significantly exposed to changes in market-wide uncertainty, for which investors require a return compensation. We also identify economic state variables to explain time-varying uncertainty exposures as well as periodic hedging characteristics of REITs. Finally, we find evidence that the source of uncertainty matters for compensating expected REIT returns.     

Time and Risk Diversification in Real Estate Investments: Assessing the Ex Post Economic Value

Welfare gains to long-horizon investors may derive from time diversification that exploits nonzero intertemporal return correlations associated with predictable returns. Real estate may thus become more desirable if its returns are negatively serially correlated. While it could be important for long-horizon investors, time diversification has been mostly investigated in asset menus without real estate and focusing on in-sample experiments. This article evaluates, ex post, the out-of-sample gains from diversification when equity real estate investment trusts (REITs) belong to the investment opportunity set. We find that diversification into REITs increases both the Sharpe ratio and the certainty equivalent of wealth for all investment horizons and for both classical and Bayesian (who account for parameter uncertainty) investors. The increases in Sharpe ratios are often statistically significant. However, the out-of-sample average Sharpe ratio and realized expected utility of long-horizon portfolios are frequently lower than that of a one-period portfolio, which casts doubt on the value of time diversification.     

Banking Relationships and REIT Capital Structure

This article examines the evolution of real estate investment trust (REIT) capital structure in the new REIT era with a focus on the effects of banking relationships on REIT capital structure. Using a unique sample of REITs from 1992 to 2003, we find that, after controlling for firm characteristics, REITs with banking relationships are more likely to obtain long‐term debt ratings and subsequently issue public debt. Moreover, REITs with banking relationships tend to use less secured debt and have lower leverage. These findings support the notion that banking relationships facilitate REITs' access to the public debt markets and help explain why REITs shift from traditional mortgage financing to bank debt and public capital market financing. The results also support the proposition that firm leverage should be positively related to the amount of a firm's secured debt.     

多元化经营与多元化折价--企业多元化研究的新进展

对多元化经营的讨论是传统金融学的一个重要议题。一致的共识是多元化经营会损害企业价值，多元化企业存在着多元化折价；而且大量的实证研究也具体度量了多元化折价程度。而近期对多元化经营的研究却从不同的侧面对上述结论提出了置疑。本文在总结了国外对企业多元化最新研究的基础上，认为对多元化折价的置疑本身仍存在诸多问题，因此，不能仅凭相对少量的研究结论就轻易否认多元化折价的存在。     

Risk and Return within the Single-Family Housing Market

The trade-off between risk and return in equity markets is well established. This paper examines the existence of the same trade-off in the single-family housing market. That market is dominated by homeowners, who constitute about two-thirds of U.S. households. For them the choice about how much housing and what house to buy is a joint consumption-investment decision. Furthermore, owner-occupied housing is by nature a lumpy investment whose risk cannot be completely diversified. Does this consumption-investment link negate the risk-return trade-off within the single-family housing market? Theory suggests the link still holds. This paper supplies empirical evidence in support of that theoretical result.     

Derivation of Cost of Capital and Equity Rates from Market Data

Use of the discounted cash flow (DCF) technique in investment and appraisal situations depends on readily available and reliable estimates of cost of capital and equity rates. Previous research on estimating equity rates and cost of capital from financial data sources is extremely limited and includes no evidence on the consistency of rates derived from alternative data sources. This paper derives estimates of equity rates and cost of capital from three alternative commonly available data sources. Estimates are derived separately for operating properties and for homebuilder/land developers on both a before- and after-corporate tax basis. The alternative data sources are found to yield consistent and reliable estimates of equity rates and cost of capital. Rates estimated from these sources are sufficiently accurate and reliable for most investment or appraisal applications.