nach oben

The Journal of Real Estate Finance and Economics

Erschienen in:

28.01.2017

Asymmetric Dependence in Real Estate Investment Trusts: An Asset-Pricing Analysis

verfasst von: Jamie Alcock, Petra Andrlikova

Erschienen in: The Journal of Real Estate Finance and Economics | Ausgabe 2/2018

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

REITs are often assumed to be defensive assets having a low correlation with market returns. However, this dependence is not symmetric across the joint-return distribution. Disappointment-averse investors with state-dependent preferences attach (dis-)utility to investments exhibiting (lower-tail) upper-tail asymmetric dependence. We find strong empirical evidence that investors price this asymmetric dependence in the cross section of US REIT returns. In particular, we show that REIT stocks with lower-tail asymmetric dependence attract a risk premium averaging 1.3 % p.a. and REIT stocks exhibiting upper-tail asymmetric dependence are traded at discount averaging 5.8 % p.a. We find no evidence that the equity β is positively priced in US REIT returns. Our findings imply that traditional estimators of REIT cost of capital and performance measurement are likely to be substantially misrepresentative.

Vorheriger Artikel Why Sellers Avoid Auctions: Theory and Evidence

Nächster Artikel “Cure” Effects and Mortgage Default: A Split Population Survival Time Model

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Nur mit Berechtigung zugänglich

See for example Huang and Wu 2015; Zimmer 2015; Bianchi and Guidolin 2014; Case et al. 2012b; Hoesli and Reka 2013; Rong and Trück 2010; Simon and Ng 2009; Patel and Nimmanunta 2009; Lizieri et al. 2007; Knight et al. 2005; Chatrath et al. 2000; Goldstein 1999; Lizieri and Satchell 1997a, (Lizieri and Satchell 1997b). The existence of AD is not specific to REIT markets only. There also exists a substantial literature on the existence of AD in the US stock market, see (Low et al. 2013; Bollerslev and Todorov 2011; Bali et al. 2009; Hatherley and Alcock 2007; Hong et al. 2007; Ang et al. 2006; Post and Van Vliet 2006; Hartmann et al. 2004; Patton 2004; Ang and Bekaert 2002; Ang and Chen 2002; Longin and Solnik 2001; Erb et al. 1994).

26 US Code, Section 857 - Taxation of real estate investment trusts and their beneficiaries.

During the 2008-2009 financial crisis, the REIT market experienced a dramatic decline in market value. The FTSE NAREIT U.S. Real Estate Index fell from its index value of 213.68 in January 2007 to 63.41 in March 2009 (Case et al. 2012a).

We unitize β in each data set before the J-statistic is estimated. That is for each set \(\left \{ R_{it},R_{mt} \right \}_{t=1}^{T}\), we get \(\hat {R}_{it} = R_{it} - \beta R_{mt}\), where R _{i
t} and R _{m
t} is continuously compounded return on asset i and market, and \(\beta = \textup {cov}(R_{it}, R_{mt})/\sigma _{R_{mt}}^{2}\). The first transformation implies that \(\beta _{\hat {R}_{it},R_{mt}} = 0\). This enables us to standardise the data to get identical standard deviation of the CAPM regression residuals and get \(R_{mt}^{S}\) and \(\hat {R}_{it}^{S}\). The final transformation step sets the \(\hat {\beta }\) to 1 by letting \(\tilde {R}_{mt} = R_{mt}^{S}\) and \(\tilde {R}_{it} = \hat {R}_{it}^{S} + R_{mt}^{S}\).

We limit our sample to NYSE only due to differing listing requirements of the remaining stock exchanges in the US. NYSE provides a market for well-established companies, which are expected to have a more stable stock price development. NYSE offers the highest level of disclosure of information of all the stock exchanges in the US, and contains relatively large companies with a more stable performance and operating history.

This t-statistic level of 3.0 is set by Harvey et al. (2014) to account for data mining, correlation among the tests and missing data issues.

US Code 26, Section 856.

Alcock, J., & Hatherley, A. (2009). Asymmetric dependence between domestic equity indices and its effect on portfolio construction. Australian Actuarial Journal, 15(1), 143–180.

Alcock, J., & Hatherley, A. (2016). Characterizing the asymmetric dependence. Forthcoming Review of Finance. doi:10.1093/rof/rfw022.

Alcock, J., & Steiner, E. (2016). Fundamental drivers of dependence in REIT returns. Forthcoming The Journal of Real Estate Finance and Economics. doi:10.1007/s11146-016-9562-3.

Alcock, J., Glascock, J., & Steiner, E. (2013). Manipulation in US REIT investment performance evaluation: Empirical evidence. The Journal of Real Estate Finance and Economics, 47(3), 434– 465.CrossRef

An, H., Hardin, W., & Wu, Z. (2012). Information asymmetry and corporate liquidity management: Evidence from real estate investment trusts. The Journal of Real Estate Finance and Economics, 45(3), 678–704.CrossRef

An, H., Wu, Q., & Wu, Z. (2015). REIT crash risk and institutional investors. The Journal of Real Estate Finance and Economics pp 1–32.

Ang, A., & Bekaert, G. (2002). International asset allocation with regime shifts. Review of Financial Studies, 15(4), 1137–1187.CrossRef

Ang, A., & Chen, J. (2002). Asymmetric correlations of equity portfolios. Journal of Financial Economics, 63(3), 443–494.CrossRef

Ang, A., Chen, J., & Xing, Y. (2006). Downside risk. Review of Financial Studies, 19(4), 1191–1239.CrossRef

Bali, T.G., Demirtas, K.O., & Levy, H. (2009). Is there an intertemporal relation between downside risk and expected returns? Journal of Financial and Quantitative Analysis, 44(04), 883–909.CrossRef

Belsley, D.A. (1991). A guide to using the collinearity diagnostics. Computer Science in Economics and Management, 4(1), 33–50.

Bianchi, D., & Guidolin, M. (2014). Can linear predictability models time bull and bear real estate markets? Out-of-sample evidence from REIT portfolios. The Journal of Real Estate Finance and Economics, 49(1), 116–164.CrossRef

Bollerslev, T., & Todorov, V. (2011). Tails, fears, and risk premia. The Journal of Finance, 66(6), 2165–2211.CrossRef

Bradley, M., Capozza, D.R., & Seguin, P.J. (1998). Dividend policy and cash-flow uncertainty. Real Estate Economics, 26(4), 555–580.CrossRef

Campbell, J.Y., & Yogo, M. (2006). Efficient tests of stock return predictability. Journal of Financial Economics, 81(1), 27–60.CrossRef

Campbell, J.Y., Lettau, M., Malkiel, B.G., & Xu, Y. (2001). Have individual stocks become more volatile? An empirical exploration of idiosyncratic risk. Journal of finance, 56(1).

Case, B., Hardin, W.G., & Wu, Z. (2012a). REIT dividend policies and dividend announcement effects during the 2008–2009 liquidity crisis. Real Estate Economics, 40(3), 387–421.

Case, B., Yang, Y., & Yildirim, Y. (2012b). Dynamic correlations among asset classes: REIT and stock returns. The Journal of Real Estate Finance and Economics, 44(3), 298–318.

Chan, K.C., Hendershott, P.H., & Sanders, A.B. (1990). Risk and return on real estate: Evidence from equity REITs. Real Estate Economics, 18(4), 431–452.CrossRef

Chatrath, A., Liang, Y., & McIntosh, W. (2000). The asymmetric REIT-beta puzzle. Journal of Real Estate Portfolio Management, 6(2), 101–111.

James, C.S.S., & Miffre, J. (2009). Conditional correlations and Real Estate Investment Trusts. Journal of Real Estate Portfolio Management, 15(2), 173–184.

Clayton, J., & MacKinnon, G. (2003). The relative importance of stock, bond and real estate factors in explaining REIT returns. The Journal of Real Estate Finance and Economics, 27(1), 39–60.CrossRef

Das, P.K., Freybote, J., & Marcato, G. (2015). An investigation into sentiment-induced institutional trading behavior and asset pricing in the REIT market. The Journal of Real Estate Finance and Economics pp 1–30.

Devos, E., Ong, S.E., Spieler, A.C., & Tsang, D. (2013). REIT institutional ownership dynamics and the financial crisis. The Journal of Real Estate Finance and Economics, 47(2), 266–288.CrossRef

Diamond, D.W., & Rajan, R.G. (2009). The credit crisis: Conjectures about causes and remedies. The American Economic Review, 99(2), 606.CrossRef

Erb, C.B., Harvey, C.R., & Viskanta, T.E. (1994). Forecasting international equity correlations. Financial analysts journal, 50(6), 32–45.CrossRef

Fama, E.F., & MacBeth, J.D. (1973). Risk, return, and equilibrium: Empirical tests. The Journal of Political Economy pp 607–636.

Fernandez, P., Linares, P., & Fernández acín, I. (2014). Market risk premium used in 88 countries in 2014: A survey with 8,228 answers. Available at SSRN 2450452.

Fu, F. (2009). Idiosyncratic risk and the cross-section of expected stock returns. Journal of Financial Economics, 91(1), 24–37.CrossRef

Genest, C., Gendron, M., & Bourdeau-Brien, M. (2009). The advent of copulas in finance. The European Journal of Finance, 15(7-8), 609–618.CrossRef

Ghosh, C., & Sirmans, C. (2003). Board independence, ownership structure and performance: evidence from real estate investment trusts. The Journal of Real Estate Finance and Economics, 26(2-3), 287–318.CrossRef

Glascock, J., & Hughes, W. (1995). NAREIT identified exchange listed REITs and their performance characteristics: 1972-1991. Journal of Real Estate Literature, 3(1), 63–83.

Glascock, J.L., Michayluk, D., & Neuhauser, K. (2004). The riskiness of REITs surrounding the October 1997 stock market decline. The Journal of Real Estate Finance and Economics, 28(4), 339–354.CrossRef

Goetzmann, W., Ingersoll, J., Spiegel, M., & Welch, I. (2007). Portfolio performance manipulation and manipulation-proof performance measures. Review of Financial Studies, 20(5), 1503–1546.CrossRef

Goldstein, M.A. (1999). REIT return behavior in advancing and declining stock markets. Real Estate Finance.

Grant, S., & Kajii, A. (1998). AUSI expected utility: An anticipated utility theory of relative disappointment aversion. Journal of Economic Behavior & Organization, 37 (3), 277–290.CrossRef

Grant, S., Kajii, A., & Polak, B. (2001). Different notions of disappointment aversion. Economics Letters, 70(2), 203–208.CrossRef

Gul, F. (1991). A theory of disappointment aversion. Econometrica: Journal of the Econometric Society pp 667–686.

Hartmann, P., Straetmans, S., & De Vries, C.G. (2004). Asset market linkages in crisis periods. Review of Economics and Statistics, 86(1), 313–326.CrossRef

Harvey, C.R., Liu, Y., & Zhu, H. (2014). ANd the cross-section of expected returns. Tech. rep., National Bureau of Economic Research.

Hatherley, A., & Alcock, J. (2007). Portfolio construction incorporating asymmetric dependence structures: A user’s guide. Accounting & Finance, 47(3), 447–472.CrossRef

Hill, M.D., Kelly, G.W., & Hardin, I.I.I.W.G. (2012). Market value of REIT liquidity. The Journal of Real Estate Finance and Economics, 45(2), 383–401.CrossRef

Hoesli, M., & Reka, K. (2013). Volatility spillovers, comovements and contagion in securitized real estate markets. The Journal of Real Estate Finance and Economics, 47(1), 1–35.CrossRef

Hong, Y., Tu, J., & Zhou, G. (2007). Asymmetries in stock returns: Statistical tests and economic evaluation. Review of Financial Studies, 20(5), 1547–1581.CrossRef

Howe, J.S., & Shilling, J.D. (1990). REIT advisor performance. Real Estate Economics, 18(4), 479–500.CrossRef

Jz, H., & Zhong, Z.K. (2013). Time variation in diversification benefits of commodity, REITs, and TIPS. The Journal of Real Estate Finance and Economics, 46(1), 152–192.CrossRef

Huang, M., & Wu, C.C. (2015). Economic benefits and determinants of extreme dependences between REIT and stock returns. Review of Quantitative Finance and Accounting, 44(2), 299–327.CrossRef

Hung, S.Y.K., & Glascock, J.L. (2008). Momentum profitability and market trend: evidence from REITs. The Journal of Real Estate Finance and Economics, 37 (1), 51–69.CrossRef

Jensen, M.C. (1986). Agency cost of free cash flow, corporate finance, and takeovers. Corporate Finance, and Takeovers American Economic Review, 76(2).

Knight, J., Lizieri, C., & Satchell, S. (2005). Diversification when it hurts? The joint distributions of real estate and equity markets 1. Journal of Property Research, 22(04), 309–323.CrossRef

Kwon, Y.K. (1985). Derivation of the capital asset pricing model without norMality or quadratic preference: a note. The Journal of Finance, 40(5), 1505–1509.CrossRef

Lizieri, C., & Satchell, S. (1997a). Interactions between property and equity markets: An investigation of linkages in the United Kingdom 1972–1992. The Journal of Real Estate Finance and Economics, 15(1), 11–26.

Lizieri, C., & Satchell, S. (1997b). Property company performance and real interest rates: a regime-switching approach. Journal of Property Research, 14(2), 85–97.

Lizieri, C., Satchell, S., & Zhang, Q. (2007). The underlying return-generating factors for REIT returns: an application of independent component analysis. Real Estate Economics, 35(4), 569–598.CrossRef

Longin, F., & Solnik, B. (2001). Extreme correlation of international equity markets. Journal of Finance pp 649–676.

Low, R.K.Y., Alcock, J., Faff, R., & Brailsford, T. (2013). Canonical vine copulas in the context of modern portfolio management: Are they worth it? Journal of Banking & Finance, 37(8), 3085–3099.CrossRef

Merton, R.C. (1987). Presidential address: a simple model of capital market equilibrium. Journal of Finance, 42, 483–510.CrossRef

Newey, W.K., & West, K.D. (1987). A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica, 55(3), 703–708.CrossRef

Newey, W.K., & West, K.D. (1994). Automatic lag selection in covariance matrix estimation. The Review of Economic Studies, 61(4), 631–653.CrossRef

Pai, A., & Geltner, D. (2007). Stocks are from Mars, real estate is from Venus Journal of Portfolio Management p 134.

Patel, K., & Nimmanunta, K. (2009). Tail dependence in REIT returns. Tech. rep., European Real Estate Society (ERES).

Patton, A.J. (2004). On the out-of-sample importance of skewness and asymmetric dependence for asset allocation. Journal of Financial Econometrics, 2(1), 130–168.CrossRef

Post, T., & Van Vliet, P. (2006). Downside risk and asset pricing. Journal of Banking & Finance, 30(3), 823–849.

Rong, N., & Trück, S. (2010). Returns of REITs and stock markets: Measuring dependence and risk. Journal of Property Investment & Finance, 28(1), 34–57.CrossRef

Simon, S., & Ng, W.L. (2009). The effect of the real estate downturn on the link between REITs and the stock market. Journal of Real Estate Portfolio Management, 15(3), 211–219.

Skiadas, C. (1997). Conditioning and aggregation of preferences. Econometrica, 65(2), 347–367.CrossRef

Stapleton, R.C., & Subrahmanyam, M.G. (1983). The market model and capital asset pricing theory: a note. The Journal of Finance, 38(5), 1637–1642.CrossRef

Sun, L., Titman, S.D., & Twite, G.J. (2015). REIT and commercial real estate returns: A postmortem of the financial crisis. Real Estate Economics, 43(1), 8–36.CrossRef

Zhou, J., & Anderson, R.I. (2012). Extreme risk measures for international REIT markets. The Journal of Real Estate Finance and Economics, 45(1), 152–170.CrossRef

Zhou, J., & Anderson, R.I. (2013). An empirical investigation of herding behavior in the US REIT market. The Journal of Real Estate Finance and Economics, 47(1), 83–108.CrossRef

Zimmer, D.M. (2015). Asymmetric dependence in house prices: evidence from usa and international data. Empirical Economics, 49(1), 161–183.CrossRef

Titel: Asymmetric Dependence in Real Estate Investment Trusts: An Asset-Pricing Analysis
verfasst von: Jamie Alcock
Petra Andrlikova
Publikationsdatum: 28.01.2017
Verlag: Springer US
Erschienen in: The Journal of Real Estate Finance and Economics / Ausgabe 2/2018
Print ISSN: 0895-5638
Elektronische ISSN: 1573-045X
DOI: https://doi.org/10.1007/s11146-016-9593-9

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Weitere Artikel der Ausgabe 2/2018

Can Investors Hold More Real Estate? Evidence from Statistical Properties of Listed REIT versus Non-REIT Property Companies in the U.S.

“Cure” Effects and Mortgage Default: A Split Population Survival Time Model

Why Sellers Avoid Auctions: Theory and Evidence

Real Estate Market Segmentation: Hotels as Exemplar

House Age, Price and Rent: Implications from Land-Structure Decomposition