What Factors Determine International Real Estate Security Returns?

Foort Hamelink and Martin Hoesli
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Foort Hamelink: Lombard Odier & Cie, Vrije Universiteit and FAME
Martin Hoesli: HEC-University of Geneva, FAME and University of Aberdeen

FAME Research Paper Series from International Center for Financial Asset Management and Engineering

Abstract: We use constrained cross-section regressions to disentangle the effects of various factors on international real estate security returns. Besides a common factor, pure country, property type, size, and value/growth factors are considered. The value/growth measure that is used in this paper provides for each security the relative importance of the value and growth components, rather than a binary classification. The value/growth factor is found to be volatile and to have a substantial effect on returns over the analyzed period February 1990-April 2003. Country factors are the dominant factors, and size is shown to have a negative impact on returns. Statistical factors derived by means of cluster analysis explain about one third of specific returns on international real estate securities. The implication for portfolio managers is that failing to recognize the importance of the various factors leads to the portfolio being exposed to systematic risk.

Keywords: securitized real estate; international diversification; multi-factor model; value/growth (search for similar items in EconPapers)
JEL-codes: C21 G11 G15 (search for similar items in EconPapers)
Date: 2003-07
New Economics Papers: this item is included in nep-fin and nep-ure
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Related works:
Journal Article: What Factors Determine International Real Estate Security Returns? (2004)
Working Paper: What Factors Determine International Real Estate Security Returns? (2002)
Working Paper: What Factors Determine International Real Estate Security Returns? (2002)
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