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Paper eres2014_232:
The Diverging Role of the Systematic Risk Factors: Evidence from European Real Estate Stock Markets

id eres2014_232
authors Lang, Stephan; Alexander Scholz
year 2014
title The Diverging Role of the Systematic Risk Factors: Evidence from European Real Estate Stock Markets
source 21st Annual European Real Estate Society Conference in Bucharest, Romania
summary The risk-return relationship of real estate equities is of particular interest for investors, practitioners and researchers. This paper examines in an asset pricing framework whether the systematic risk factors related to market, size, BE/ME and liquidity play a significantly different role in explaining the returns of listed real estate companies, compared to general equities. By applying the propensity score matching (PSM) algorithm, we 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 size, BE/ME and liquidity. The empirical results indicate that European real estate equity returns load significantly differently on the size, value and liquidity factor, whilst the influence of the market factor seems to be equivalent. In addition, we find an economically and statistically significant underperformance of European real estate equities, after accounting for the diverging role of the systematic risk factors. Running the conditional time-series regression, we further reveal that these findings are predominately caused by the divergent risk-return behavior of real estate equities in economic downturns. This is the first study to employ the propensity score matching in the context of real estate asset pricing.
series ERES:conference
more &slot=2830
discussion No discussions. Post discussion ...
ratings Ratings: 3 3 5
session O : Real Estate Finance & Investment
last changed 2014/10/21 21:51
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