The diverging role of the systematic risk factors: evidence from real estate stock markets

2015 ◽  
Vol 33 (1) ◽  
pp. 81-106 ◽  
Author(s):  
Stephan Lang ◽  
Alexander Scholz
Keyword(s):  
Risk Factors ◽  
Time Series ◽  
Asset Pricing ◽  
Real Estate ◽  
Systematic Risk ◽  
Content Type ◽  
Risk Return ◽  
Systematic Risk Factors ◽  
Relationship Of

Purpose – The risk-return relationship of real estate equities is of particular interest for investors, practitioners and researchers. The purpose of this paper is to examine, in an asset pricing framework, whether the systematic risk factors play a significantly different role in explaining the returns of listed real estate companies, compared to general equities. Design/methodology/approach – Running the difference test of the Fama-French three-factor and the liquidity-augmented asset pricing model, the authors analyze the effect of the systematic risk factors related to market, size, BE/ME and liquidity in a time-series setting over the period July 1992 to June 2012. By applying the propensity score matching (PSM) algorithm, the authors bypass the “curse of dimensionality” of traditional matching techniques and identify a comparable control sample of general equities, in terms of the relevant firm characteristics of size, BE/ME and liquidity. Findings – The empirical results indicate that European real estate equity returns load significantly differently on the size, value and liquidity factor, while the influence of the market factor seems to be equivalent. In addition, the authors find an economically and statistically significant underperformance of European real estate equities, after accounting for the diverging role of systematic risk factors. Running the conditional time-series regression, the authors further reveal that these findings are predominately caused by the divergent risk-return behavior of real estate equities in economic downturns. Practical implications – Due to the diverging role of the systematic risk factors in pricing real estate equities, the authors provide evidence of potential diversification benefits for investors and portfolio managers. Originality/value – This is the first real estate asset pricing study to dissect the unique risk-return relationship of real estate equities by employing propensity score matching.

Liquidity and real estate asset pricing: a pan-European study

2014 ◽  
Vol 7 (1) ◽  
pp. 59-86 ◽  
Author(s):  
Alexander Scholz ◽  
Stephan Lang ◽  
Wolfgang Schaefers
Keyword(s):  
Risk Factors ◽  
Risk Factor ◽  
Asset Pricing ◽  
Real Estate ◽  
Stock Returns ◽  
Systematic Risk ◽  
Time Series Regression ◽  
Content Type ◽  
Market Factors ◽  
The Impact

Purpose – Understanding the pricing of real estate equities is a central objective of real estate research. This paper aims to investigate the impact of liquidity on European real estate equity returns, after accounting for well-documented systematic risk factors. Design/methodology/approach – Based on risk factors derived from general equity data, the authors extend the Fama-French time-series regression approach by a liquidity factor, using a pan-European sample of 272 real estate equities. Findings – The empirical results indicate that liquidity is a significant pricing factor in real estate stock returns, even after controlling for market, size and book-to-market factors. In addition, the authors detect that real estate stock returns load predominantly positively on the liquidity risk factor, suggesting that real estate equities tend to behave like illiquid common equities. These findings are underpinned by a series of robustness checks. Running a comparative analysis with alternative factor models, the authors further demonstrate that the liquidity-augmented asset-pricing model is most appropriate for explaining European real estate stock returns. Research limitations/implications – The inclusion of sentiment and downside risk factors could provide further insights into real estate asset pricing in European capital markets. Originality/value – This is the first study to examine the role of liquidity as a systematic risk factor in a pan-European setting.

The risk of real estate ownership: evidence from German equities

2015 ◽  
Vol 8 (2) ◽  
pp. 107-129 ◽  
Author(s):  
Karim Rochdi
Keyword(s):  
Risk Factors ◽  
Real Estate ◽  
Risk Premium ◽  
Balance Sheet ◽  
Systematic Risk ◽  
Considerable Proportion ◽  
Content Type ◽  
Corporate Real Estate ◽  
Systematic Risk Factors ◽  
Estate Ownership

Purpose – This paper aims to investigate the repercussions and impact of corporate real estate on the returns of non-real-estate equities in a time-series setting. While the ownership of real estate constitutes a considerable proportion of most listed firms’ balance sheet, in the existing literature, whether or not the benefits outweigh the risks associated with corporate real estate, is the subject of controversy. Design/methodology/approach – The role of corporate real estate ownership in the pricing of returns is examined, after taking well-documented systematic risk factors into account. Employing a data sample from 1999 to 2014, the conditions and characteristics faced by firms with distinct levels of corporate real estate holdings are identified and analyzed. Findings – The findings reveal that corporate real estate intensity indeed serves as a priced determinant in the German stock market. Among other results, the real-estate-specific risk factor shows countercyclical patterns and is particularly relevant for companies within the manufacturing sector. Practical implications – The findings provide new insights into the interpretation of corporate real estate and expected general equity returns. Thus, the present analysis is of particular interest for investors, as well as the management boards of listed companies. Originality/value – To the best of the author’s knowledge, this is the first paper to investigate the ownership of corporate real estate as a priced factor for German equities, after accounting for the well-documented systematic risk factors, namely, market (market risk premium), size (small minus big) and book-to-market-ratio (BE/ME) (high minus low).

Firm location and systematic risk: the real estate channel

2020 ◽  
Vol 19 (3) ◽  
pp. 387-409
Author(s):  
Xiang Gao ◽  
John Topuz
Keyword(s):  
Asset Pricing ◽  
Real Estate ◽  
Abnormal Returns ◽  
Systematic Risk ◽  
Local Economy ◽  
Firm Risk ◽  
Firm Level ◽  
Content Type ◽  
Land Availability ◽  
Real Estate Prices

Purpose This paper aims to investigate whether the cyclicality of local real estate prices affects the systematic risk of local firms using a geography-based measure of land availability as a quasi-exogenous proxy for real estate price cyclicality. Design/methodology/approach This paper uses the geography-based land availability measure as a proxy for the procyclicality of real estate prices and the location of a firm’s headquarters as a proxy for the location of its real estate assets. Four-factor asset pricing model (market, size, value and momentum factors) is used to examine whether firms headquartered in more land-constrained metropolitan statistical areas have higher systematic risks. Findings The results show that real estate prices are more procyclical in areas with lower land availability and firms headquartered in these areas have higher systematic risk. This effect is more pronounced for firms with higher real estate holdings as a ratio of their tangible assets. Moreover, there are no abnormal returns to trading strategies based on land availability, consistent with stock market betas reflecting this local real estate factor. Research limitations/implications This paper contributes to the literature on local asset pricing factors, the collateral role of firms’ real estate holdings and the co-movement of security prices of geographically close firms. Practical implications This paper has important managerial implications by showing that, when firms decide on the location of their buildings (e.g. headquarters building, manufacturing plant and retail outlet), the location’s influence on systematic risk should be part of the decision-making process. Originality/value This paper is among the first to use a geography-based measure of land availability to study whether the procyclicality of local real estate prices influences firm risk independent of the procyclicality of the local economy. Thus, both the portfolio formed and firm-level analyses provide a more direct evidence of the positive relation between the procyclicality of local real estate prices and firm risk.

Systematic risk factors in European real estate equities

2011 ◽  
Vol 4 (3) ◽  
pp. 185-224 ◽  
Author(s):  
Kai‐Magnus Schulte ◽  
Tobias Dechant ◽  
Wolfgang Schaefers
Keyword(s):  
Risk Factors ◽  
Real Estate ◽  
Systematic Risk ◽  
Systematic Risk Factors

The dimensional linkage between public service motivation and innovative behavior in public sector institutions; the mediating role of psychological empowerment

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Asim Rafique ◽  
Yumei Hou ◽  
Muhammad Adnan Zahid Chudhery ◽  
Nida Gull ◽  
Syed Jameel Ahmed
Keyword(s):  
Public Sector ◽  
Public Service ◽  
Psychological Empowerment ◽  
Public Service Motivation ◽  
Innovative Behavior ◽  
Content Type ◽  
Mediating Role ◽  
Relationship Of ◽  
The Relationship

PurposeInnovations are imperative for organizational growth and sustainability. This study focuses on the employees' innovative behavior, a source of organizational innovations, which has received substantial attention from the researchers. Based on the psychological empowerment theory, the study exposes the effect of the various dimensions of public service motivation (PSM) on employees' innovative behavior (IB) in public sector institutions especially in the context of developing countries such as Pakistan. Moreover, the study also investigates the mediating role of psychological empowerment (PSE) between the dimensions of PSM and IB.Design/methodology/approachThis study used the cross-sectional research design. By using random sampling, the adapted survey questionnaires were used to collect data from 346 faculty members of public sector universities located in provincial capitals of Pakistan. A partial least square–structural equation modeling (PLS-SEM) tool was used to assess the proposed hypotheses through SMART-PLS software.FindingsResults revealed that attraction to policymaking (APM), compassion (COM), self-sacrifice (SS) have a significant impact on employees' PSE and their innovative behavior, while the relationship of commitment to the public interest (CPI) with PSE and IB was found insignificant. Moreover, PSE partially mediated the relationship between PSM dimensions and employees' IB.Originality/valueThere was a scarcity of research on IB especially in public sector institutions such as academia. This study theoretically contributed to the literature by providing a refined picture in assessing the proposed relationship of the constructs. This is also one of the original studies that examine the relationship between the dimensions of PSM and IB.

The auditing profession and the key audit matter reporting requirement

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Dessalegn Getie Mihret ◽  
Monika Kansal ◽  
Mohammad Badrul Muttakin ◽  
Tarek Rana
Keyword(s):  
Standard Setting ◽  
International Standards ◽  
Financial Reports ◽  
Content Type ◽  
Reporting Requirement ◽  
Regulatory Rule ◽  
Rule Setting ◽  
A Site ◽  
Relationship Of

Purpose This study aims to examine the setting of International Standards on Auditing (ISA) 701 on disclosing key audit matters (KAMs) to explore the role of standard setting in maintaining or reconstituting the relationship of the auditing profession with preparers and users of financial reports. Design/methodology/approach This study draws on concepts from the sociology of the professions literature and the regulatory space metaphor. Data comprises comment letters and other documents pertaining to the setting of ISA 701. Findings The study shows that the KAM reporting requirement is part of the ongoing re-calibration of the regulatory arrangements governing auditing, which started in the early 2000s. This study interprets standard setting as a site for negotiating the relationships between linked ecologies in the audit regulatory space, namely, the auditing profession, preparers of financial statements and users of audited reports. This study identifies three processes involved in setting ISA 701, namely, reconstitution of the rules governing auditors’ reports as a link between the three ecologies, preserving boundaries between the auditing profession and preparers and negotiation aimed at balancing competing interests of the interrelated ecologies. Originality/value The study offers insights into the role of regulatory rule setting as a central medium through which the adaptive relationship of the profession with its environment is negotiated.

Potential for optimising organisational structures in the technical due diligence for real estate transactions in Germany

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yannis Steffen Oetken ◽  
Christian Hofstadler ◽  
Felix Meckmann
Keyword(s):  
Real Estate ◽  
Transaction Management ◽  
Due Diligence ◽  
Content Type ◽  
The Real ◽  
The Real Estate ◽  
Theoretical Approaches ◽  
Transaction Process ◽  
Organisational Structures

PurposeThe individual levels involved in real estate management are thoroughly discussed in the literature. This paper provides a structured meta-analysis of the different theoretical approaches in German-speaking countries. It also investigates the integration of transaction management and technical due diligence into the concepts of organisation theory. In this process, the interfaces are analysed and optimised models are developed for transferring the technical due diligence findings to the operational level.Design/methodology/approachInterviews with transaction management experts were conducted based on a narrative literature review. These interviews shed light on how the components of transaction management and due diligence are integrated into the transaction process, with a particular focus on technical due diligence. They also provide insights into how the related results are taken into account in relation to the transaction, and how they are transferred into the operational phase.FindingsIt becomes apparent that the role of transaction management is not clearly defined and delimited in the structural model of the real estate industry. Technical due diligence findings are usually transferred to the operation of the property via several, manual interfaces with corresponding losses of knowledge. The related models derived and developed for the purpose of operational optimisation define the role of transaction management against a technical background and identify the interfaces to be considered.Practical implicationsThe significance of transaction management for subsequent operations is discussed and elaborated on. More specifically, transferring safety-relevant, high-priority findings from the technical due diligence exercise plays a crucial role for the modelling stage. On the implementation level, the derived models serve as a basis for customising the internal organisational structure.Originality/valueIn Germany, there has hardly been any research into the involvement of technical experts in the real estate transaction process to date. This paper provides initial approaches to optimising organisational structures and sustainably integrating technical due diligence findings into real estate operations.

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