Defining the three Rs of commercial property market performance

2015 ◽  
Vol 33 (6) ◽  
pp. 481-493 ◽  
Author(s):  
David Higgins
Keyword(s):  
Standard Deviation ◽  
Power Law ◽  
Extreme Values ◽  
Market Performance ◽  
Downside Risk ◽  
Property Market ◽  
Power Law Distribution ◽  
Content Type ◽  
Commercial Property ◽  
Price Fluctuations

Purpose – Modern property investment allocation techniques are typically based on recognised measures of return and risk. Whilst these models work well in theory under stable conditions, they can fail when stable assumptions cease to hold and extreme volatility occurs. This is evident in commercial property markets which can experience extended stable periods followed by large concentrated negative price fluctuations as a result of major unpredictable events. This extreme volatility may not be fully reflected in traditional risk calculations and can lead to ruin. The paper aims to discuss these issues. Design/methodology/approach – This research studies 28 years of quarterly Australian direct commercial property market performance data for normal distribution features and signs of extreme downside risk. For the extreme values, Power Law distribution models were examined as to provide a better probability measure of large negative price fluctuations. Findings – The results show that the normal bell curve distribution underestimated actual extreme values both by frequency and extent, being by at least 30 per cent for the outermost data point. For the statistical outliers beyond 2 SD, a Power Law distribution can overcome many of the shortcomings of the standard deviation approach and therefore better measure the probability of ruin, being extreme downside risk. Practical implications – In highlighting the challenges to measuring property market performance, analysis of extreme downside risk should be separated from traditional standard deviation risk calculations. In recognising these two different types of risk, extreme downside risk has a magnified domino effect with the tendency of bad news to come in crowds. Big price changes can lead to market crashes and financial ruin which is well beyond the standard deviation risk measure. This needs to be recognised and developed as there is evidence that extreme downside risk determinants are increasing by magnitude, frequency and impact. Originality/value – Analysis of extreme downside risk should form a key part of the property decision process and be included in the property investment manager’s toolkit. Modelling techniques for estimating measures of tail risk provide challenges and have shown to be beyond traditional risk management practices, being too narrow and constraining a definition. Measuring extreme risk and the likelihood of ruin is the first step in analysing and dealing with risk in both an asset class and portfolio context.

Research on power-law distribution of long-tail data and its application to tourism recommendation

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Xiang Chen ◽  
Yaohui Pan ◽  
Bin Luo
Keyword(s):  
Power Law ◽  
Computational Cost ◽  
High Dimensional ◽  
Power Law Distribution ◽  
Long Tail ◽  
Content Type ◽  
User Similarity ◽  
Similarity Calculation ◽  
Recommendation Diversity ◽  
Long Tail Phenomenon

PurposeOne challenge for tourism recommendation systems (TRSs) is the long-tail phenomenon of ratings or popularity among tourist products. This paper aims to improve the diversity and efficiency of TRSs utilizing the power-law distribution of long-tail data.Design/methodology/approachUsing Sina Weibo check-in data for example, this paper demonstrates that the long-tail phenomenon exists in user travel behaviors and fits the long-tail travel data with power-law distribution. To solve data sparsity in the long-tail part and increase recommendation diversity of TRSs, the paper proposes a collaborative filtering (CF) recommendation algorithm combining with power-law distribution. Furthermore, by combining power-law distribution with locality sensitive hashing (LSH), the paper optimizes user similarity calculation to improve the calculation efficiency of TRSs.FindingsThe comparison experiments show that the proposed algorithm greatly improves the recommendation diversity and calculation efficiency while maintaining high precision and recall of recommendation, providing basis for further dynamic recommendation.Originality/valueTRSs provide a better solution to the problem of information overload in the tourism field. However, based on the historical travel data over the whole population, most current TRSs tend to recommend hot and similar spots to users, lacking in diversity and failing to provide personalized recommendations. Meanwhile, the large high-dimensional sparse data in online social networks (OSNs) brings huge computational cost when calculating user similarity with traditional CF algorithms. In this paper, by integrating the power-law distribution of travel data and tourism recommendation technology, the authors’ work solves the problem existing in traditional TRSs that recommendation results are overly narrow and lack in serendipity, and provides users with a wider range of choices and hence improves user experience in TRSs. Meanwhile, utilizing locality sensitive hash functions, the authors’ work hashes users from high-dimensional vectors to one-dimensional integers and maps similar users into the same buckets, which realizes fast nearest neighbors search in high-dimensional space and solves the extreme sparsity problem of high dimensional travel data. Furthermore, applying the hashing results to user similarity calculation, the paper greatly reduces computational complexity and improves calculation efficiency of TRSs, which reduces the system load and enables TRSs to provide effective and timely recommendations for users.

A new model for Auckland commercial property yields

2019 ◽  
Vol 37 (1) ◽  
pp. 42-57 ◽  
Author(s):  
Moshe Szweizer
Keyword(s):  
Local Property ◽  
International Investment ◽  
Field Application ◽  
Property Market ◽  
Investment Activity ◽  
Content Type ◽  
Commercial Property ◽  
High Data ◽  
Investment Volume ◽  
Current Cycle

PurposeThe purpose of this paper is to extend the studies of commercial property yields by providing a cross-field approach through the implementation of methods used in physics.Design/methodology/approachBased on the equations used to describe real gases in physics, the commercial property yields are expressed through a model, as a product of two terms. The first term estimates the influence of the income change and investment on yields. The second estimates the yield variation as a function of property size. Additionally, the model combines the macroeconomic and microeconomic components influencing yield adjustment. Calculation of each component involves procedures developed in physics, with the investment volume being linked to the amount of gas and the microeconomic yield being linked to the gas compressibility.FindingsThe model was applied to the Auckland office and industrial markets, both to the historic and current cycle. At the macro-level, it was found that the use of accumulation of investment over a relevant cycle, results in a high data to model correlation. When modelling the yields at the micro-level, a relationship between the outlying properties and the yield softening was observed.Practical implicationsThe paper provides an enhanced modelling power through association of the cyclic and investment activity with the yield change. Moreover, the model may be used to decouple the local and the international investment components and the extent of their influence on the local property market. Furthermore, it may be used to estimate the influence of the property size on the yield.Originality/valueThis research provides a new cross-field application of modelling techniques and enhances the understanding of factors influencing yield adjustments.

The two sides of CEO pay injustice: a commentary

2018 ◽  
Vol 16 (1) ◽  
pp. 90-96
Author(s):  
Albert Cannella ◽  
Valerie Sy
Keyword(s):  
Power Law ◽  
Design Methodology ◽  
Ceo Compensation ◽  
Power Law Distribution ◽  
Content Type ◽  
Compensation Process ◽  
Ceo Pay ◽  
Two Sides ◽  
Theoretical Issues ◽  
Research Domain

Purpose The purpose of this paper is to extend discussions in the CEO compensation research domain. Specifically, this paper provides a critical analysis of the power law conceptualization and pay injustice contribution by Aguinis, Martin, Gomez-Mejia, O’Boyle and Joo. Design/methodology/approach This commentary addresses statistical and theoretical issues of the power law distribution with respect to prior compensation research and offers additional perspectives on the issue of CEO pay deservingness. Findings The power law is worth investigating further, but more attention should be paid to outliers and fit to the distribution. Stronger theory is needed for using the power law to explain CEO compensation phenomena, especially regarding standard firm performance measures and anomalies in the compensation process. Finally, “injustice” and “deservingness” in discussions of CEO pay exist in the eye of the beholder. Originality/value This paper offers additional considerations for scholars to explore when applying the power law distribution to compensation research.

Strange attractor in the Auckland commercial property market

2020 ◽  
Vol 38 (6) ◽  
pp. 579-596
Author(s):  
Moshe Szweizer
Keyword(s):  
Chaos Theory ◽  
Mathematical Reasoning ◽  
Market Dynamics ◽  
Property Market ◽  
General Behaviour ◽  
Content Type ◽  
Commercial Property ◽  
Market Conduct ◽  
Property Markets ◽  
Market Behaviour

PurposeThe purpose of this study is to provide a chaos theory-based framework, which can be used to model commercial property market dynamics.Design/methodology/approachThe paper is presented in two parts. In the first, rigorous mathematical reasoning is entertained, so to derive an attractor describing a set of feedback formulae. In the second part, the attractor definition is used to model the Auckland commercial office market. The model is exposed through a set of seven scenarios allowing for analysis of the market behaviour under various exogenously imposed conditions.FindingsThe general behaviour of the model is in agreement with the commercial property market conduct observed in Auckland. The model provides information related to the market turning points and allows for an explanation of some intricate market dynamics. These include the anatomy of a market peak and its response to the liquidity oversupply.Practical implicationsThe model may be used to expand our understanding of the market performance under various exogenically imposed conditions, which allows for planning of market interventions in a more refined manner.Originality/valueThe paper is original, in the way the chaos theory is applied to the property markets modelling and allows for expanding the understanding of the market behaviour.

scholarly journals Property market modelling and forecasting: simple vs complex models

2015 ◽  
Vol 33 (4) ◽  
pp. 337-361 ◽  
Author(s):  
Arvydas Jadevicius ◽  
Simon Huston
Keyword(s):  
Explanatory Variable ◽  
Moving Average ◽  
Model Complexity ◽  
Property Market ◽  
Content Type ◽  
Commercial Property ◽  
Explanatory Variables ◽  
Bank Rate ◽  
Out Of Sample ◽  
Modelling And Forecasting

Purpose – The commercial property market is complex, but the literature suggests that simple models can forecast it. To confirm the claim, the purpose of this paper is to assess a set of models to forecast UK commercial property market. Design/methodology/approach – The employs five modelling techniques, including Autoregressive Integrated Moving Average (ARIMA), ARIMA with a vector of an explanatory variable(s) (ARIMAX), Simple Regression (SR), Multiple Regression, and Vector Autoregression (VAR) to model IPD UK All Property Rents Index. The Bank Rate, Construction Orders, Employment, Expenditure, FTSE AS Index, Gross Domestic Product (GDP), and Inflation are all explanatory variables selected for the research. Findings – The modelling results confirm that increased model complexity does not necessarily yield greater forecasting accuracy. The analysis shows that although the more complex VAR specification is amongst the best fitting models, its accuracy in producing out-of-sample forecasts is poorer than of some less complex specifications. The average Theil’s U-value for VAR model is around 0.65, which is higher than that of less complex SR with Expenditure (0.176) or ARIMAX (3,0,3) with GDP (0.31) as an explanatory variable models. Practical implications – The paper calls analysts to make forecasts more user-friendly, which are easy to use or understand, and for researchers to pay greater attention to the development and improvement of simpler forecasting techniques or simplification of more complex structures. Originality/value – The paper addresses the issue of complexity in modelling commercial property market. It advocates for simplicity in modelling and forecasting.

scholarly journals How long is UK property cycle?

2017 ◽  
Vol 35 (4) ◽  
pp. 410-426 ◽  
Author(s):  
Arvydas Jadevicius ◽  
Simon Hugh Huston
Keyword(s):  
Investment Decision ◽  
Future Market ◽  
Cycle Duration ◽  
Property Market ◽  
Content Type ◽  
Commercial Property ◽  
Novel Approach ◽  
Investment Decision Making ◽  
Step Algorithm ◽  
The Uk

Purpose The purpose of this paper is to assess the duration of the UK commercial property cycles, their volatility and persistence to gauge future market direction. Design/methodology/approach The study employs a novel approach to dissect cycles in a form of a three-step algorithm. First, the Hodrick-Prescott de-trends the selected variables. Second, volatility (measured by the variance) screens periods of atypical fluctuations in the series. Finally, the series is regressed against its past values to assess the level of persistence. The sequential steps screen the length of the cycles in UK commercial property market to facilitate interpretation. Findings The estimates suggest that UK commercial property market follows an eight-year cycle. Combined modelling results indicate that the current market trend is likely to change over the coming year. The modelling suggests increasing probability of a market correction in late 2016/early 2017. Practical implications This updated appreciation of the UK commercial property cycle duration allows for better market timing and investment decision making. Originality/value The paper adds additional evidence on the contested issue of UK commercial property cycle duration.

The elusive linkage between CEO pay and performance

2018 ◽  
Vol 16 (1) ◽  
pp. 57-65
Author(s):  
Gerald Edward Ledford ◽  
Edward E. Lawler
Keyword(s):  
Organizational Performance ◽  
Power Law ◽  
Chief Executive ◽  
Power Law Distribution ◽  
Content Type ◽  
Ceo Tenure ◽  
Dependent Variables ◽  
Ceo Pay ◽  
External Conditions ◽  
And Performance

Purpose The authors comment on the paper by Aguinis et al. (2018). The authors believe that their hypotheses probably are true, but their methodology is flawed and their data do not support their conclusions. Design/Methodology The authors review and comment on the paper by Aguinis et al. (2018). Findings The data do not adequately demonstrate a power law distribution for chief executive officer’s (CEO) performance because the analysis confounded external conditions affecting performance, and the authors use inappropriate dependent variables. The analysis does not demonstrate a power law distribution for CEO pay because the analysis does not take into account changes in pay level and mix over time. The analysis does not show a lack of overlap between the two distributions because it does not take into account the way that the CEOs are paid for performance and because it uses CEO pay averaged over CEO tenure. Research limitations/implications A more convincing analysis of the authors’ hypothesis would require the use of total shareholder return (TSR) as the dependent variable for organizational performance and would require a number of much more specific controls. Practical implications The authors call for greater use of power law thinking by practitioners in setting CEO pay. Their analysis indicates that practitioners already think in power law terms and allocate CEO pay accordingly. Moreover, power law theory and findings could be misused as an excuse for paying average CEOs much more than they are already paid. Social implications The authors add another perspective on CEO pay. Originality/value The authors’ perspective is informed both by research and by consulting experience on CEO pay projects.

Using downside risk in evaluating the performance of Malaysian mutual funds

2015 ◽  
Vol 10 (3) ◽  
pp. 427-447 ◽  
Author(s):  
Mohammad Reza Tavakoli Baghdadabad ◽  
Masood Fooladi
Keyword(s):  
Performance Evaluation ◽  
Standard Deviation ◽  
Stock Market ◽  
Mutual Funds ◽  
Systematic Risk ◽  
Rank Correlation ◽  
Downside Risk ◽  
High Rank ◽  
Content Type ◽  
Market Asymmetry

Purpose – The purpose of this paper is to provide the modified measures of risk-adjusted performance evaluation of Malaysian mutual funds using the downside risk concepts, and promote the ability of managers and investors in making logical decisions under the market asymmetry condition. Design/methodology/approach – This study focusses on the performance evaluation of Malaysian mutual funds using eight modified measures of Sharpe, Treynor, M2, Jensen’s α, information ratio (IR), MSR, SPI, and leverage factor. These modified measures use the downside systematic risk and semi-standard deviation instead of systematic risk and conventional standard deviation, respectively, to evaluate the performance of Malaysian mutual funds over the period 2000-2011. Findings – The results indicate that the conventional measures of performance evaluation do not have a crucial influence on the relative evaluation of mutual funds. Three modified measures of Sharpe, Treynor, and M2 have a high correlation with the conventional Sharpe measure and can be used instead of the conventional Sharpe measure. Since, two modified measures of Treynor and M2 display a high rank correlation coefficient with the conventional Treynor measure, they can be replaced with this traditional measure. In addition, two modified IR and MSR measures along with the modified SPI and conventional SPI show very high rank correlation coefficients in relation to each other. The results also document a modified leverage factor less than one for all funds. It can be concluded that the strategy of un-levering the investor’s holding must be followed. Practical implications – The empirical evidence of this study can be utilized as inputs in the process of decision-making by different types of investors who are interested in participating especially in Malaysian stock market and generally in global stock market under the market asymmetry condition. Originality/value – The contribution of this study is to modify five measures of M2, IR, MSR, FPI, and leverage factor in the downside risk framework which is a work on a rather under-researched area.

scholarly journals Materiality and external assurance in corporate sustainability reporting

2016 ◽  
Vol 9 (2) ◽  
pp. 147-170 ◽  
Author(s):  
Peter Jones ◽  
David Hillier ◽  
Daphne Comfort
Keyword(s):  
Corporate Sustainability ◽  
Sustainability Reporting ◽  
Current Status ◽  
Property Market ◽  
Content Type ◽  
Commercial Property ◽  
Corporate Websites ◽  
Preliminary Examination ◽  
Stakeholder Pressure ◽  
Property Companies

Purpose The purposes of this paper are to provide a preliminary examination of the extent to which Europe’s leading commercial property companies are embracing the concept of materiality and commissioning independent external assurance as part of their sustainability reporting processes and to offer some wider reflections on materiality and external assurance in sustainability reporting. Design/methodology/approach The paper begins with an introduction to corporate sustainability, an outline of the European property market and of the drivers for, and challenges to, sustainability for property companies and a review of the characteristics of materiality and external assurance. The information on which the paper is based is drawn from the leading European commercial property companies’ corporate websites. Findings The paper reveals that all of Europe’s leading property companies had either reported or provided information on sustainability but that only approximately half of these companies had embraced materiality or commissioned some form of independent external assurance as an integral part of their sustainability reporting processes. In many ways, this reduces the reliability and credibility of the leading property companies’ sustainability reports. Looking to the future, growing stakeholder pressure may force more of the leading European property companies to embrace materiality and commission external assurance as systematic and integral elements in the sustainability reporting process. Originality/value The paper provides an accessible review of the current status of materiality and external assurance among Europe’s leading commercial property companies’ sustainability reporting and as such it will interest professionals, practitioners, academics and students interested in the sustainability in the property industry.

The significance and performance of US commercial property in a post-GFC context

2017 ◽  
Vol 35 (6) ◽  
pp. 575-588 ◽  
Author(s):  
Muhammad Jufri Marzuki ◽  
Graeme Newell
Keyword(s):  
Institutional Investors ◽  
Investment Strategy ◽  
Portfolio Diversification ◽  
Investment Opportunity ◽  
Property Market ◽  
Content Type ◽  
Commercial Property ◽  
The Us ◽  
Asset Portfolio

Purpose US commercial property is an important investment opportunity for institutional investors. The purpose of this paper is to assess the significance, risk-adjusted performance and portfolio diversification benefits of US commercial property (both direct property and REITs) in a mixed-asset portfolio over 1994-2016. The 2009-2016 post-GFC recovery of US commercial property is specifically highlighted. Design/methodology/approach Using quarterly total returns, the risk-adjusted performance and portfolio diversification benefits of US commercial property over 1994-2016 are assessed. Efficient frontier and asset allocation diagrams are used to assess the role of US commercial property in a mixed-asset portfolio. Sub-period analysis over 2009-2016 is used to assess the post-GFC recovery of US commercial property. Findings US commercial property delivered mixed results over 1994-2016; direct property gave the best risk-adjusted performance, while US-REITs performance was hampered by high volatility. Since the GFC, both forms of US commercial property have delivered stronger risk-adjusted returns with improved diversification benefits, especially in the context of an inter-property investment strategy. However, US-REITs did not improve their diversification benefits with the stock market over this period. This sees US commercial property as an important component in the US mixed-asset portfolio in the post-GFC environment, with a much stronger role exhibited by US direct property in the post-GFC mixed-asset portfolio. Practical implications US commercial property emerged from the GFC as a stronger and more robust property investment opportunity, with both the direct property and US-REITs fully recovered to their pre-GFC performance level in 2012. The results highlight the major role of US commercial property in a US mixed-asset portfolio in the post-GFC context. The superior risk-adjusted performance of US commercial property sees both direct and listed US commercial property contributing significantly to the mixed-asset portfolio throughout the entire risk-return spectrum, particularly direct property. Given the increased capital flows into the US property market since the GFC, this is particularly important as many investors, both local and international, use direct and listed property investment opportunities as conduits for their significant US commercial property exposure. Originality/value This paper is the first published empirical research analysis that specifically assessed the post-GFC performance and role of US commercial property in a mixed-asset portfolio. This research enables empirically validated, more informed and practical property investment decision making by institutional investors regarding the strategic role of US commercial property in a mixed-asset portfolio in a post-GFC context.

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