Downside Beta and the Cross-sectional Determinants of Listed Property Trust Returns

Chyi Lee, Jon Robinson and Richard Reed

Journal of Real Estate Portfolio Management, 2008, vol. 14, issue 1, 49-62

Abstract: Executive Summary. This study examines the importance of downside beta when seeking to explain variations in listed property trust (LPT) returns in Australia between 1993 and 2005. The results reveal that downside beta outperforms conventional beta and provides higher explanatory power to the cross-sectional LPT return variations. The results also indicate that investors only require a premium for downside risk. However, the explanatory power of downside beta has diminished once the co-kurtosis of LPTs is controlled. Interestingly, the results also reveal that by itself downside beta is unable to fully explain returns in line with strong evidence for momentum and book-to-market ratio. The findings provide additional insights for investors and real estate analysts into the pricing of LPTs.

Date: 2008
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DOI: 10.1080/10835547.2008.12089797

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