Transactions-Driven Commercial Real Estate Returns: The Panacea to Asset Allocation Models?

A transactions-driven commercial real estate return series is generated in this study to determine whether the reliance on appraised values in the estimation of real estate returns is the source of the reported underpricing of real estate relative to stocks, bonds, and bills when analyzed in a traditional mean-variance setting. The reported underpricing of commercial real estate would be rational if transactions-driven returns exhibit more variance than appraisal-driven returns. While we find that transactions-driven real estate returns have greater variance than appraisal-driven returns for individual properties, most of the individual property risk is idiosyncratic and diversified away at the portfolio level. Real estate continues to be a dominate asset class in mean-variance allocation models even when represented with transactions-driven indices.¹     

Playing the regulation game – the rise and demise of British Caledonian

Privatisation means that an increasing number of UK companies have to "play the regulation game". Business success will be determined not just by conventional strategy choices but also by regulatory strategy. British Caledonian is a striking example of one such company. Its financial fortunes ebbed and flowed with shifts in regulatory policy. BCal's chosen strategy – rapid expansion to build an alternative network to compete with British Airways – was always likely to be highly risky. But the risks were increased by regulatory controls which denied B Cal access to the UK's major airport at London Heathrow. In these regulatory conditions BCal's chosen strategy was almost certainly mis-conceived. It should have changed its regulatory strategy or – failing success – changed its business strategy. Changing neither was a recipe for the airline's eventual demise.     

The European business cycle

This paper deals with the existence and identification of acommon European growth cycle. Univariate Markov switching autoregressionsare used for individual countries in order to detect changesin the mean growth rate of industrial production. A Markov switchingvector autoregression model is then used to identify a commoncycle in Europe. Three important results are obtained: we finda common unobserved component governing European business cycledynamics, suggesting the existence of a common business cycle;we propose a dating of the business cycle, both for an indexof industrial protection and GDP, and both chronologies appearto be consistent; and finally we retrieve an important set ofstylized facts and relate these with those reported for theUS. Finally two further issues are investigated: first, thecontribution of the European business cycle to the individualcountry cycles; and second, we undertake an impulse responseanalysis to investigate the response of each individual countryto European expansions and recessions.     

Quarantine Risk Analysis

Australia's quarantine policy is based on the concept of manageable risk, which is underpinned by quarantine risk analysis, which this article examines with particular reference to recommendations of the 1996 Australian Quarantine Review. Quarantine risk assessment addresses disease concerns associated with any particular proposed import and may also require detailed examination of possible economic and environmental effects. The degree of quantification varies, and more quantitative approaches may be either deterministic or stochastic. Assessments consider both the probability of an event occurring and its consequences, including the direct economic effect of any introduction of an exotic disease.     

doleful acts

Mike Fisher, an Institute of Economic Affairs' trustee and director of Whale Tankers, explains how employment legislation is a cause of unemployment.     

a planning disaster in the car park

Mike Fisher describes difficulties that Whale Tankers, a small manufacturing company, had in getting planning permission for a car park. In looking for a cause of unemployment, he argues, one has no need to look further than the planning system.     

Strategy and Circumstance: The Success of the NUJ's New Technology Policy

This article assesses the success of the National Union of Journalists (NUJ) in negotiating the introduction of computerised editorial systems (direct input) into provincial newspapers. It employs a quantitative and qualitative analysis to suggest that the NUJ has been exemplary in using the New Technology Agreement (NTA) as a bargaining tool in order to limit the negative effects of technological change and to secure notable benefits — particularly pay increases. This contrasts with other survey evidence which concludes that NTAs have fallen short of the TUC's original objectives in advocating their use. The success of the NUJ is attributed to an appropriate match between the union's new technology policy/strategy and the particular industrial circumstances. It may also explain the recent moves towards decollectivisation in the newspaper industry.