Inflation hedging and protection characteristics of infrastructure and real estate assets

2015 ◽  
Vol 33 (1) ◽  
pp. 19-44 ◽  
Author(s):  
Daniel Wurstbauer ◽  
Wolfgang Schäfers
Keyword(s):  
Real Estate ◽  
Asset Returns ◽  
Content Type ◽  
Causality Tests ◽  
Short Run ◽  
Short And Long Term ◽  
Infrastructure Investments ◽  
Real Estate Assets ◽  
Inflation Hedging

Purpose – Similar to real estate, infrastructure investments are regarded as providing a good inflation hedge and inflation protection. However, the empirical literature on infrastructure and inflation is scarce. Therefore, the purpose of this paper is to investigate the short- and long-term inflation-hedging characteristics, as well as the inflation protection associated with infrastructure and real estate assets. Design/methodology/approach – Based on a unique data set for direct infrastructure performance, a listed infrastructure index, common direct and listed real estate indices, the authors test for short- and long-term inflation-hedging characteristics of these assets in the USA from 1991-2013. The authors employ the traditional Fama and Schwert (1977) framework, as well as Engle and Granger (1987) co-integration tests. Granger causality tests are further conducted, so as to gain insight into the short-run dynamics. Finally, shortfall risk measures are applied to investigate the inflation protection characteristics of the different assets over increasingly long investment horizons. Findings – The empirical results indicate that in the short run, only direct infrastructure provides a partial hedge against inflation. However, co-integration tests suggest that all series have a long-run co-movement with inflation, implying a long-term hedge. The causality tests reveal reverse unidirectional causality – while real estate asset returns are Granger-caused by inflation, infrastructure asset returns seem to cause inflation. These findings further confirm that both assets represent a distinct asset class. Ultimately, direct infrastructure investments exhibit the most desirable inflation protection characteristics among the set of assets. Research limitations/implications – This study only presents results based on a composite direct infrastructure index, as no sub-indices for sub-sectors are available yet. Practical implications – Investors seeking assets that are sensitive to inflation and mitigate inflation risk should consider direct infrastructure investments in their asset allocation strategy. Originality/value – This is the first study to examine the ability of direct infrastructure to assess inflation risk.

Benefits of international portfolio diversification

2014 ◽  
Vol 7 (4) ◽  
pp. 457-472 ◽  
Author(s):  
S. Jamaledin Mohseni Zonouzi ◽  
Gholamreza Mansourfar ◽  
Fateme Bagherzadeh Azar
Keyword(s):  
Middle Eastern ◽  
Equity Returns ◽  
Content Type ◽  
International Portfolio Diversification ◽  
Long Run ◽  
Ardl Approach ◽  
International Portfolio ◽  
Short Run ◽  
Short And Long Term

Purpose – This paper aims to investigate opportunities of the short- and long-run international portfolio diversification (IPD) benefits by investing in the Middle Eastern oil-producing countries. Over the past decades, IPD has been the integral feature of global capital markets. Several potential benefits like increasing returns and/or reducing risk have made investors to internationalize their portfolios. Solnik’s theory (1974) approved that gains can be achieved through IPD if returns in the different markets are not perfectly correlated. This may attribute to low correlations of equity returns among different economies. In this regards, there would be a large potential of diversification benefits for investors that diversify into new emerging group of economies such as equity markets of the main oil-producing countries. These markets are often segmented and they may ensure a superior return rate for a given risk level. Design/methodology/approach – In most of the previous studies, Pearson’s correlation test is used to analyze the short-run relationship of market prices. However, recent empirical studies indicate that correlations between equity returns vary over the time. To examine the time-varying conditional correlation, this paper used the dynamic conditional correlation (DCC) model to investigate opportunities of the short-run IPD benefits. In addition, for the long-run linkage analysis, the autoregressive distributed lag (ADRL) approach introduced by Pesaran et al. (2001) is applied. Findings – It is found that, the market returns of the sampled countries are not definitely correlated in the short- and long-term. So, international portfolio investors may get the short- and long-term diversification benefits by diversifying their portfolios among the Middle Eastern equity markets, namely, Iran, Bahrain, Qatar, Kuwait, Oman, Saudi Arabia and UAE. Originality/value – This paper departs from earlier studies by focusing on the dynamic characteristics of correlation. Two main issues are pursued in this paper. First, instead of modeling the correlation by methods like Pearson correlation coefficient that consider the constant-correlation assumption, this paper directly uses the DCC model. Second, to empirically estimate the long-run relationship among stock markets in the Middle Eastern oil-producing countries, the ARDL approach is utilized. The ARDL approach is more robust and performs well for small sample sizes than other co-integration techniques.

Quantification of financial consequences of buildings' ageing: analysis of panel building-level data from the Polish office space market

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bolesław Kołodziejczyk ◽  
Dmytro Osiichuk ◽  
Paweł Mielcarz
Keyword(s):  
Real Estate ◽  
Financial Performance ◽  
Content Type ◽  
Financial Outcomes ◽  
Level Data ◽  
Real Estate Investments ◽  
Occupancy Rates ◽  
The Impact ◽  
Real Estate Assets

PurposeRelying on a unique proprietary Polish office market space database, the paper attempts to quantify the impact of buildings' age on the financial performance of real estate assets.Design/methodology/approachPanel econometric modeling was utilized to disentangle the impact of buildings' functional obsolescence and technical deterioration on their long-term financial performance.FindingsIn line with casual empiricism, our findings show a negative associative link between properties' age and potential lease revenue. The concomitant stickiness of service charges presages a possible long-term deterioration of financial outcomes of real estate investments. While older buildings generally have higher occupancy rates, the absorption rates are found to be negatively affected by the properties' age. On the bright side, the elasticity of vacancy rate with respect to rental rates is found to decrease as buildings get older. Further, the rent differential is confirmed to be more pronounced in higher age properties hinting at an existing potential for price discrimination, which may at least partially compensate for stagnant rents.Originality/valueOur empirical results confirm the properties' age to be a statistically significant factor in shaping the long-term performance of real estate assets, which should be better accounted for in financial projections for real estate developments.

Convergence between direct and indirect real estate investments

2016 ◽  
Vol 21 (3) ◽  
pp. 212-230 ◽  
Author(s):  
Benjamin Gbolahan Ekemode ◽  
Abel Olaleye
Keyword(s):  
Real Estate ◽  
Risk Reduction ◽  
Stock Exchange ◽  
Real Estate Market ◽  
Short Term ◽  
Content Type ◽  
Asset Portfolio ◽  
Short Run ◽  
Improved Performance ◽  
Real Estate Assets

Purpose This paper aimed to examine the return/risk performance of direct and indirect real estate (listed property stock) in the Nigerian real estate market and analyzed the short-term integration between the two classes of real estate assets. It also established whether investors could achieve diversification benefits by combining both assets in a portfolio. Design/methodology/approach The data utilized comprised annual returns on direct real estate calculated from the rental and capital values of 226 direct commercial properties obtained from property valuers in Lagos, Nigeria, for a period of January 1999-December 2014. The appraisal-based direct real estate returns were de-smoothed using the Geltner (1993) procedure. The annual returns of indirect real estate were also computed from the transactions of listed property stock on the Nigerian Stock Exchange for the study period. The return-risk profiles were also broken down into short- and medium-term sub-periods, comprising 3, 5, 8 and 12 years to reflect the level of volatility in the market, whereas the nature of the short-term relationship between the two real estate assets classes was tested using Granger causality technique. Findings The results revealed that listed property stock performed better than unsmoothed direct real estate on a risk-adjusted performance basis. The performance profile, however, varies over the different sub-periods considered. Short-term integration analysis showed that there was no bidirectional relationship between direct and listed property stock, implying diversification and risk reduction possibilities in combining both assets with other asset classes in a domestic asset portfolio. Overall, the results confirm the findings of previous study that listed property stocks return is segmented from the direct real estate market upon which its pricing and trading in the stock market are based. Practical implications The conclusion of the study suggests that investors could achieve improved performance by investing in listed property stocks than direct real estate in the Nigerian real estate market. The inclusion of both assets in a domestic mixed-asset portfolio could also be expected to offer diversification and risk reduction benefits. Originality/value This is one of the few studies that examine the short-run integration between direct real estate and listed property stocks with a focus on an emerging African market.

Evaluating the cost and benefits of earthquake protection of buildings

2018 ◽  
Vol 11 (2) ◽  
pp. 263-278 ◽  
Author(s):  
Benedetto Manganelli ◽  
Marco Vona ◽  
Pierfrancesco De Paola
Keyword(s):  
Real Estate ◽  
Seismic Risk ◽  
Risk Mitigation ◽  
Tax Incentives ◽  
Seismic Retrofitting ◽  
Content Type ◽  
Seismic Risk Mitigation ◽  
The Cost ◽  
Earthquake Protection ◽  
Real Estate Assets

Purpose The purpose of this study is the evaluation of the cost and benefits of earthquake protection of buildings to verify whether the legislative push, through tax incentives, will produce results and lead to a redevelopment of private real estate assets. Design/methodology/approach Through contingent valuation, this research aims to measure the propensity of homeowners to invest in the seismic security of their properties. The sample of homeowners was selected in a southern Italy city, which was characterized by a medium-high seismic hazard. The willingness to pay, once made independent from the family income, was compared with the actual cost of a seismic retrofitting technique to assess its cost-effectiveness. Findings The analysis developed on an example case shows that the economic sustainability of the intervention is only verified when considering the current tax incentives for this type of intervention. Practical implications Choosing to introduce a system to compulsory insurance against seismic risk could certainly be a strong incentive for the implementation of retrofitting interventions on private real estate assets. In this direction, investigations like this can be fundamental to establish the fair risk premium. Originality/value The need for effective seismic risk mitigation policies is also based on the growing awareness of the, often fatal, effects of seismic events, emphasized by the recent medium and high intensity events that hit Italy. The issue of the security of residential buildings is therefore a very topical issue in view of their high seismic vulnerability and the vast number of buildings requiring major seismic retrofitting. Therefore, the propensity of owners to intervene in improving the seismic performance of their properties can be crucial in seismic risk mitigation.

Management of competition among sellers and its performance implications for business-to-business electronic platforms

2015 ◽  
Vol 6 (2) ◽  
pp. 199-222 ◽  
Author(s):  
Xiaoling Li ◽  
Xingyao Ren ◽  
Xu Zheng
Keyword(s):  
Longitudinal Research ◽  
Time Windows ◽  
Customer Relationship ◽  
Effective Control ◽  
Marketing Tactics ◽  
Long Term Effects ◽  
Content Type ◽  
Short And Long Term ◽  
Term Performance

Purpose – This paper aimed to analyze the short- and long-term effects of the breadth and depth of seller competition on the performance of platform companies, and investigated the underlying mechanisms of customers’ two-sided marketing tactics on the structure of the competition between sellers. Design/methodology/approach – A longitudinal research design was adopted by gathering daily market objective data on e-commerce platforms for 250 days, and the dynamic evolution effects was analyzed by using a vector autoregression model which compared the differences between the short- and long-term effectiveness of different customer relationship management (CRM) strategies. Findings – The breadth of competition amongst sellers improves the performance of platforms, whilst the depth of competition among sellers has a positive effect on the short-term performance. However, it has a negative effect on the long-term performance of their platforms. In both the short and long terms, advertising tactics that attract new buyers contribute more to increases in the breadth of seller competition than those that attract existing buyers do. Subsidies for new sellers decrease the depth of seller competition more than those for old sellers. Research limitations/implications – Further research could be undertaken to investigate the validity of marketing tactics other than advertising tactics, and thus expand the time windows of the available data. Practical implications – It is imperative for platform companies to implement effective control over seller competition to balance the interests of the sellers and of themselves. Originality/value – The dyadic paradigm of CRM research has been extended by considering the perspective of the electronic platform company, how the tactics of exploitation and exploration of two-sided customers impact upon seller competitive structures have been delved into and why new customers have a unique value to platform companies has been identified.

Where Did All the Dollars Go? The Effect of Cash Flows on Capital and Asset Structure

2011 ◽  
Vol 46 (5) ◽  
pp. 1259-1294 ◽  
Author(s):  
Sudipto Dasgupta ◽  
Thomas H. Noe ◽  
Zhen Wang
Keyword(s):  
Cash Flow ◽  
Economic Effect ◽  
Balance Sheet ◽  
Cash Flows ◽  
Long Run ◽  
Goods Market ◽  
Short Run ◽  
Debt Market ◽  
Short And Long Term

AbstractThis paper documents the short- and long-term balance sheet effect of cash flows. We show that cash savings in the short run and debt reduction in both the short and the long run account for a substantial fraction of cash flow use. Although, in the long run, investment exhibits substantial sensitivity to cash flows, investment does not absorb the entire cash flow shock. In fact, the tighter the financial constraints, the smaller the fraction of cash flow absorbed by investment and the more by leverage reduction. Firms stage their response to increases in cash flow, delaying investment while building up cash stocks and reducing leverage. These results suggest that much of the short-run economic effect of cash flow shocks to the corporate sector may be channeled into the corporate debt market rather than the capital goods market, especially when financing constraints tighten.

The long‐term inflation hedging effectiveness of real estate and financial assets

2008 ◽  
Vol 25 (4) ◽  
pp. 267-278 ◽  
Author(s):  
Abeyratna Gunasekarage ◽  
David M. Power ◽  
Ting Ting Zhou
Keyword(s):  
Real Estate ◽  
Financial Assets ◽  
Hedging Effectiveness ◽  
Inflation Hedging

Deviations from fundamental value and future closed-end country fund returns

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Luis Berggrun ◽  
Emilio Cardona ◽  
Edmundo Lizarzaburu
Keyword(s):  
Control Variable ◽  
Asset Returns ◽  
Weak Form ◽  
Share Price ◽  
Local Market ◽  
Impulse Response Functions ◽  
Content Type ◽  
Vector Autoregressive ◽  
Causality Tests ◽  
Fundamental Value

PurposeThis article examines whether deviations from fundamental value or closed-end country fund's discounts or premiums forecast future share price returns or net asset returns.Design/methodology/approachThe main empirical (econometric) tool is a vector autoregressive (VAR) model. The authors model share price returns and net asset returns as a function of their lagged values, the discounts or premiums, and a control variable for local market returns. The authors also conduct Dickey Fuller and Granger causality tests as well as impulse response functions.FindingsIt was found that deviations from fundamental value do predict share price returns. This predictability is contrary to weak-form market efficiency. Premiums or discounts predict net asset returns but weakly.Originality/valueThe findings point to the idea that the closed-end fund market is somewhat predictable and inefficient (in its weak form) since the market appears to be able to anticipate a fund's future returns using information contained in the premiums (or discounts). In particular, the market has the ability to anticipate future behaviour because growing premiums forecast declining share price returns for one or two periods ahead.

Help us to help you

2019 ◽  
Vol 35 (10) ◽  
pp. 29-30
Keyword(s):  
Asia Pacific ◽  
Asia Pacific Region ◽  
Content Type ◽  
Pertinent Information ◽  
Short And Long Term ◽  
Long Term Performance ◽  
Performance Gains ◽  
Term Performance ◽  
Practical Implications

Purpose This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings Hotels in the Asia-Pacific region have yet to fully utilize social media to promote their CSR initiatives. This means there is huge potential for improved stakeholder engagement, leading to short- and long-term performance gains. Originality The briefing saves busy executives, strategists and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

scholarly journals Environmental and social sustainability priorities

2015 ◽  
Vol 35 (2) ◽  
pp. 216-245 ◽  
Author(s):  
Annachiara Longoni ◽  
Raffaella Cagliano
Keyword(s):  
Business Strategy ◽  
Social Sustainability ◽  
Operations Strategy ◽  
Manufacturing Strategy ◽  
Competitive Priorities ◽  
Content Type ◽  
Short And Long Term ◽  
Using Data ◽  
Term Performance

Purpose – Environmental and social sustainability are becoming key competitive priorities for companies, but the way in which they are integrated in operations strategies remains an open issue. The purpose of this paper is to determine whether established operations strategy configuration models (i.e. price-oriented, market-oriented and capability-oriented models) are modified to include environmental and social priorities and whether different operations strategy configuration models are equally successful in the short and long term. Design/methodology/approach – Analyses were performed using data from the International Manufacturing Strategy Survey (2009), including companies in the assembly industry in 21 different countries. According to previous studies, cluster analysis of competitive priorities and ANOVA analysis of the business strategy and short- and long-term performance were performed. Findings – The results show that traditional operations strategy configuration models are slightly modified. Market-oriented and capability-oriented operations strategies are complemented by environmental and social sustainability priorities. These operations strategies are adopted by companies with a differentiation and innovation business strategy. Moreover, capability-oriented companies, which are the most committed to environmental and social sustainability, perform better in both the short and long term. Practical implications – This research shows to companies that traditional operations strategies focusing on specific competitive priorities (e.g. low price) are being replaced by more holistic strategies that include sustainability priorities. However, environmental and social priorities contribute to competitive advantage when complementing capability-oriented operations strategies. Originality/value – This paper extends operations strategy configuration models highlighting how environmental and social sustainability priorities can be deployed together with traditional competitive operations priorities.

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