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Paper eres2006_260:
RISK AND RETURN IN EUROPEAN PROPERTY MARKETS – AN EMPIRICAL INVESTIGATION

id eres2006_260
authors Lorenz, David; Stefan Trück
year 2006
title RISK AND RETURN IN EUROPEAN PROPERTY MARKETS – AN EMPIRICAL INVESTIGATION
source Book of Abstracts: 13th Annual European Real Estate Society Conference in Weimar, Germany
summary In the absence of appropriate comparable sales data property valuation literature suggests building up the capitalisation and/or discount rate starting from a risk free rate. In response to this need the basic purpose of this paper is to explore and explain actual returns in different property markets across Europe. We present an analysis of risk-return relationships in real estate markets and the interactions between the local capital and property markets. Based on observed excess returns over long term riskless yields, we examine spreads and risk premia for individual property markets. Our findings are significant correlations between observed yield spreads in the markets. However, there exist large differences between European markets regarding the magnitude of spreads and the risk-return relationship. Furthermore, we observe longer periods of negative risk premia for many segments of the property market. The findings of the paper can partially be used to back up property valuers’ assumptions when determining capitalisation and/or discount rates without having access to sufficient comparable transaction evidence.
keywords property markets; excess returns; risk premium; property valuation
series ERES:conference
type normal paper
discussion No discussions. Post discussion ...
ratings
session 9-C
last changed 2008/11/01 09:47
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