Direct real estate, securitized real estate, and equity market dynamic connectedness

2021 ◽  
pp. 1-20
Author(s):  
Thi Thu Ha Nguyen ◽  
Faruk Balli ◽  
Hatice Ozer Balli ◽  
Iqbal Syed
Keyword(s):  
Real Estate ◽  
Equity Market ◽  
Market Dynamic

International Real Estate Review

2017 ◽  
Vol 20 (1) ◽  
pp. 1-21
Author(s):  
Greg MacKinnon ◽  
◽  
Jon Spinney ◽  
Keyword(s):  
Real Estate ◽  
Equity Market ◽  
Portfolio Performance ◽  
Real Estate Investment ◽  
Construction Techniques ◽  
Time Period ◽  
High Volatility ◽  
Weighted Portfolio ◽  
Portfolio Design ◽  
Better Than

We examine the market for U.S. equity real estate investment trusts (REITs) for evidence of the volatility effect, in which low volatility stocks tend to outperform high volatility ones, as has been found in the general equity market by prior research. While there is some evidence of a volatility effect in the first ten years of the sample, this disappears in a more recent time period. Furthermore, we test the efficacy of low risk portfolio construction techniques and find that none perform any better than a market cap weighted portfolio ¡V although they are also no worse ¡V over any of the time periods examined. Thus, there is no evidence that using a risk-based portfolio design that emphasizes low volatility would improve portfolio performance for a REIT allocation.

Evergrande turmoil to worry, not wreck, global markets

2021 ◽  
Keyword(s):  
Real Estate ◽  
Housing Market ◽  
Equity Market ◽  
Global Markets ◽  
Content Type ◽  
The Real ◽  
The Real Estate ◽  
Financial Conditions ◽  
Real Estate Sector ◽  
Global Demand

Significance Evergrande's troubles have increased concern about China's all-important housing market, as Beijing seems intent on reducing excessive leverage in the real-estate sector. Global markets are already unsettled by the threat to the global recovery posed by the Delta variant of COVID-19 and the possibility of inflation prompting faster-than-expected monetary tightening. Impacts Contagion beyond Chinese housing should be very limited: illustrating this, China’s equity market has remained resilient. Slower growth in China will reduce global demand for exports and add to the concerns about manufacturing and services activity slowing. Global financial conditions are likely to remain extremely accommodative, supporting stocks amid mounting concerns about lofty valuations.

scholarly journals International Real Estate Review

2001 ◽  
Vol 4 (1) ◽  
pp. 26-42
Author(s):  
Simon Stevenson ◽  
Keyword(s):  
Real Estate ◽  
Empirical Evidence ◽  
Strong Evidence ◽  
Positive Relationship ◽  
International Markets ◽  
Equity Market ◽  
The Other ◽  
Real Estate Securities ◽  
The Relationship ◽  
Minimal Evidence

This study re-examines the relationship between real estate securities and inflation in a total of ten international markets. In addition to the raw data, both the orthogonalized and hedged approaches were adopted in order to strip out the general impact of the domestic equity market. The results revealed that there is minimal evidence of a positive relationship between real estate securities and inflation, which is in line with existing empirical evidence. However, the strong evidence of perverse relationship, noted in previous studies of REITs, is not robust throughout the other nine markets. The hedged and orthogonalized data also provided minimal evidence in favour of a positive relationship, both in the short and long terms.

scholarly journals Commercial Real Estate and Equity Market Bubbles: Are They Contagious to REITs?

Urban Studies ◽  
2013 ◽  
Vol 50 (12) ◽  
pp. 2496-2516 ◽  
Author(s):  
Ogonna Nneji ◽  
Chris Brooks ◽  
Charles Ward
Keyword(s):  
Real Estate ◽  
Equity Market ◽  
Commercial Real Estate

Idiosyncratic risk and the cross-section of European real estate equity returns

2014 ◽  
Vol 7 (1) ◽  
pp. 29-58 ◽  
Author(s):  
Kai-Magnus Schulte
Keyword(s):  
Real Estate ◽  
Cross Section ◽  
Time Trends ◽  
Idiosyncratic Risk ◽  
Equity Market ◽  
Idiosyncratic Volatility ◽  
Content Type ◽  
Market Portfolio ◽  
The Cross

Purpose – This study is the first to examine the role of idiosyncratic risk in the pricing of European real estate equities. The capital asset pricing model predicts that in equilibrium, investors should hold the market portfolio. As a result, investors should only be rewarded for carrying undiversifiable systematic risk and not for diversifiable idiosyncratic risk. The study is adding to the growing body of countering studies by first examining time trends of idiosyncratic risk and subsequently the pricing of idiosyncratic risk in European real estate equities. The paper aims to discuss these issues. Design/methodology/approach – The study analyses 293 real estate equities from 16 European capital markets over the 1991-2011 period. The framework of Fama and MacBeth is employed. Regressions of the cross-section of expected equity excess returns on idiosyncratic risk and other firm characteristics such as beta, size, book-to-market equity (BE/ME), momentum, liquidity and co-skewness are performed. Due to recent evidence on the conditional pricing of European real estate equities, the pricing is also investigated using the conditional framework of Pettengill et al. Either realised or expected idiosyncratic volatility forecasted using a set of exponential generalized autoregressive conditional heteroskedasticity models are employed. Findings – The initial analysis of time trends in idiosyncratic risk reveals that while the early 1990s are characterised by both high total and idiosyncratic volatility, a strong downward trend emerged in 1992 which was only interrupted by the burst of the dotcom bubble and the 9/11 attacks along with the global financial and economic crisis. The largest part of total volatility is idiosyncratic and therefore firm-specific in nature. Simple cross-correlations indicate that high beta, small size, high BE/ME, low momentum, low liquidity and high co-skewness equities have higher idiosyncratic risk. While size and BE/ME are priced unconditionally from 1991 to 2011, both measures of idiosyncratic risk fail to achieve significance at reasonable levels. However, once conditioned on the general equity market or real estate equity market, a strong positive relationship between idiosyncratic risk and expected returns emerges in up-markets, while the opposite relationship exists in down-markets. The relationship is robust to firm-specific factors and a series of robustness checks. Research limitations/implications – The results show that ignoring the conditional relationship between idiosyncratic risk and returns might result in the false realisation that idiosyncratic risk does not matter in the pricing of risky (real estate) assets. Originality/value – This study is the first to examine the role of idiosyncratic risk in the pricing of European real estate equities. The study reveals differences in the pricing of European real estate equities and US REITs. The study highlights that ignoring the conditional relationship between idiosyncratic risk and returns might result in the false realisation that idiosyncratic risk does not matter in the pricing of risky assets.

scholarly journals International Real Estate Review

2017 ◽  
Vol 20 (3) ◽  
pp. 287-324
Author(s):  
J. Andrew Hansz ◽  
◽  
Wikrom Prombutr ◽  
Ying Zhang ◽  
Tingyu Zhou ◽  
...  
Keyword(s):  
Real Estate ◽  
Causal Relation ◽  
Equity Market ◽  
Real Estate Investment Trusts ◽  
Real Estate Investment ◽  
Short Term ◽  
Macroeconomic Factors ◽  
Equity Reits ◽  
Market Factor

We investigate the long- and short-term interrelationships between equity and mortgage real estate investment trusts (REITs) by focusing on decomposed income and appreciation components. We find that the previously documented long-term cointegration relation between equity and mortgage REIT prices stems exclusively from their income components and subsequently, the appreciation components contribute nothing to such a long-term relationship. We also find that the previously documented short-term causal relation between equity and mortgage REIT returns is due to the causality that runs from the appreciation returns of equity REITs to those of mortgage REITs while their income returns do not lead to causality. Lastly, we show that the income returns of both equity and mortgage REITs are influenced by the same equity market factor while their appreciation returns are responsive to different macroeconomic factors, which explain the heterogeneous performance between them.

scholarly journals Co-Integration Test of Selected Indexes on the Share Market and Index of Housing Real Estate Prices

2020 ◽  
Vol 28 (1) ◽  
pp. 100-111
Author(s):  
Rafal Wolski
Keyword(s):  
Real Estate ◽  
Stock Market ◽  
Housing Market ◽  
The United States ◽  
Equity Market ◽  
Real Estate Market ◽  
Cost Of Equity ◽  
Real Estate Markets ◽  
Secondary Housing Market ◽  
The Cost

AbstractThe integration of financial markets is an ongoing process throughout the world. Research shows that, from Australia through Europe to the United States, the capital and real estate markets are integrating, influencing each other. Although this process seems obvious, only research can show whether it actually occurs. Identifying these relationships is important for analyzing the entire market. Many methods, such as estimating the cost of equity, have been developed with the stock market in mind. Meanwhile, real estate valuation requires the cost of equity. Market integration is the rationale for using equity market methods on the real estate market.Aim of the work - the research is aimed at verifying whether there is cointegration between the secondary housing market and the stock market. A research hypothesis was put forward: the stock market and secondary housing market are integrated.Research methodology - the study used co-integration analysis using the Engle-Granger test. The study was conducted in the period from the third quarter of 2006 to the fourth quarter of 2018.Result - The tests carried out showed the existence of co-integration in one out of 36 cases for the explanatory variable - the delayed WIG index and the explained variable in the average price of residential real estate on the secondary market for the 7 largest Polish cities.Originality / Value - demonstrating the co-integration of markets justifies the use of analytical methods developed for stock markets on real estate markets. The research has no equivalent study on the Polish market. Similar analyses were carried out, but not for the stock and real estate market.

scholarly journals Designing a Portfolio Based On Risk and Return of Various Asset Classes

2017 ◽  
Vol 9 (2) ◽  
pp. 142
Author(s):  
Rashmi Soni
Keyword(s):  
Real Estate ◽  
Equity Market ◽  
The Other ◽  
Positive Relation ◽  
Minimum Risk ◽  
Risk And Return ◽  
Risk Characteristics ◽  
Asset Classes ◽  
Very High

Every investor’s dream is to maximize return with minimum risk. Since this is practically impossible, the target is to optimize the risk and return. Different asset classes perform differently at different points of time. The performance is affected by the business as well as other local and global macroeconomic parameters. Crude oil, real estate, gold etc. have given very high returns previously but have turned unattractive in recent times. Equity market has over a long term returned handsome benefits but is highly volatile and hence fraught with risks. The risk free investments like fixed, on the other hand, fall in the low-risk low-return category. The purpose of this study is to analyze the returns of various asset classes and correlate these with their risk characteristics in order to verify whether there is always a positive relation between risk and return across all asset classes and to find out the portfolio mix of the various asset classes corresponding to the desired return and risk.

scholarly journals Shifting From Real Estate to Non-Real Estate Lending Activity: Evidence on the Risk and Return Profiles of Thrift Institutions

2003 ◽  
Author(s):  
Harold A. Black ◽  
Elijah Brewer III ◽  
William E. Jackson III
Keyword(s):  
Real Estate ◽  
Stock Returns ◽  
Equity Market ◽  
Mortgage Lending ◽  
Equity Returns ◽  
Risk And Return ◽  
Consumer Lending ◽  
Banking Strategy ◽  
Lending Activity ◽  
The Impact

In this paper we study the important period where many thrifts shifted from traditional mortgage products into consumer loan products. Specifically, we examine the impact of this move toward consumer banking on the risk and return profiles of thrift institutions. One reason given for this shift was the shrinldng margins associated with the traditional mortgage lending business of the thrift industry. Other reasons are increased competition from pure-play competitors and the increased merger activity among commercial banks enabling thrifts to market themselves as consumer banks. All of these reasons help to explain why the traditional thrift model became less viable.   What strategic changes are necessary for thrift institutions to survive and compete effectively in the today’s financial environment? Thrifts may choose to rearrange their product mix, expand their investment portfolio, manage the enterprise more efficiently, or some combination of these, strategies. One strategy chosen by certain thrifts has been to shift from the traditional model of a mortgage-oriented lender to that of a consumer bank.   Using market data from the first quarter of 1985 to the fourth quarter of 1992, we examine whether thrift organizations that followed this consumer banking strategy increased or decreased their overall exposure to risk. Employing the volatility of equity returns as our measure of total thrift risk, we find that thrifts that specialized in consumer lending exhibited lower risk while maintaining similar common stock returns, relative to thrifts that did not specialize in consumer lending. This suggests that thrifts employing a strategy of significantly diversifying their asset portfolios by specializing in consumer lending were rewarded by the equity market. Conversely, thrifts that invested only a small proportion of their assets in the consumer banking strategy did not receive a similar reward from the equity market for diversifying into consumer banking.

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