Understanding Systematic Risk in Real Estate Markets

Cristian Voicu and Michael Seiler ()

Journal of Housing Research, 2013, vol. 22, issue 2, 165-201

Abstract: A one-factor pricing model is employed to investigate the internal consistency of singlefamily home and professionally-managed property prices. The risk factor used here is the U.S. real estate index, which has much stronger explanatory power than the S&P 500 Index for real estate assets. Empirical tests with this model lead to several surprising results. First, portfolios of East Coast or West Coast cities have negative risk-adjusted returns (alpha), while a portfolio of all inland cities has positive alpha. Second, a momentum strategy does not outperform the U.S. real estate index on a transaction and risk-adjusted basis, despite its ability to pick the largest-growth cities. Third, high-beta cities have negative alpha, while low-beta cities have positive alpha, even after considering transaction costs. Fourth, high rental yield cities have positive alpha and vice versa, even after transaction costs. Fifth, large cities have negative alpha, while small cities have positive alpha. Finally, expensive cities have negative alpha and vice-versa. A possible explanation for these abnormal returns is that some cities are systematically neglected by investors.

Date: 2013
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/10835547.2013.12092077 (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:taf:rjrhxx:v:22:y:2013:i:2:p:165-201

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rjrh20

DOI: 10.1080/10835547.2013.12092077

Access Statistics for this article

Journal of Housing Research is currently edited by Kimberly Goodwin

More articles in Journal of Housing Research from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().