EconPapers    
Economics at your fingertips  
 

The impact of changing risk characteristics in the A-REIT sector

Anthony J. De Francesco and Luke Hartigan ()

Journal of Property Investment & Finance, 2009, vol. 27, issue 6, 543-562

Abstract: Purpose - The Australian REIT (A-REIT) market has undergone significant change over the past ten years with a shift from passive investment strategies to more active investment strategies in an attempt to deliver higher return performance. However, this has dramatically changed the risk characteristics of A-REITs. Essentially, the sector has become more risky. Factors contributing to the increasing risk profile include: rising gearing levels; greater offshore exposure; evolving management structure towards stapled trusts, and growing market concentration. This paper aims to address these issues. Design/methodology/approach - In an attempt to gauge the impact of the changing risk characteristics over time the paper employs two formal risk measures: time-varying beta and news impact curves. Both measures indicate that the sector has become more risky. Indeed, it could be argued that the pronounced fall in A-REIT prices during late 2007 reflects a re-rating of risk on the upside. The post credit crisis financial climate warrants a review of investment strategies; in particular, growth style investments that may be carrying a high level of embedded risk and opaque income streams. Findings - Current market sentiment suggests that investors have become more risk averse, and as such, will refocus on A-REITs that cater for defensive style investments. Such vehicles will have low to moderate gearing levels, hold quality property assets in their portfolio, limited off-shore exposure, and employ sound management practices. Originality/value - The heightened risk-averse environment presents opportunities for new investment products that provide partial exposure to direct property investment as a way to mitigate excessive equity market volatility.

Keywords: Property; Risk management; Real estate; Investments; Australia (search for similar items in EconPapers)
Date: 2009
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.emeraldinsight.com/10.1108/146357809109 ... RePEc&WT.mc_id=RePEc (text/html)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jpifpp:v:27:y:2009:i:6:p:543-562

Ordering information: This journal article can be ordered from
Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
http://www.emerald.com/JPIF.htm

Access Statistics for this article

Journal of Property Investment & Finance is currently edited by Professor Nick French

More articles in Journal of Property Investment & Finance from Emerald Group Publishing
Bibliographic data for series maintained by Jade Turvey ().

 
Page updated 2021-11-26
Handle: RePEc:eme:jpifpp:v:27:y:2009:i:6:p:543-562