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SYSTEMATIC PROPERTY RISK: QUANTIFYING UK PROPERTY BETAS 1983-2005

Alan Gardner and George Matysiak

ERES from European Real Estate Society (ERES)

Abstract: The increased frequency in reporting UK property performance figures, coupled with the acceptance of the IPD database as the market standard, has enabled property to be analysed on a comparable level with other more frequently traded assets. The most widely utilised theory for pricing financial assets, the Capital Asset Pricing Model (CAPM), gives market (systematic) risk, Beta, centre stage. This paper seeks to measure the level of systematic risk (Beta) across various property types, market conditions and investment holding periods. This paper extends the authorsí previous work on investment holding periods and how excess returns (Alpha) relate to those holding periods. We draw on the uniquely constructed IPD/Gerald Eve transactions database, containing over 20,000 properties over the period 1983-2005. This research is aimed at quantifying the risk premium inherent across property types and looks at the stability of those premia over the last 22 years. It allows us to confirm our initial findings that properties held over longer periods perform, to a large extent, in line with overall market performance. One implication of this is that over the long-term portfolio performance may be no different from an index tracking approach.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2006-01-01
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Working Paper: Systematic Property Risk: Quantifying UK Property Betas 1983-2005 (2006) Downloads
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