Global Financial Integration and Real Estate Security Returns

Have globalization and increasing economic and financial integration affected the rates of return of publicly traded real estate companies around the world? Using a set of multi-factor models for annual data for 946 firms from 16 countries over the sample period, 1995-2002, we estimate the impact of a country's economic openness on returns of publicly traded real estate firms, controlling for the effects of global capital markets, domestic macro-economic, and firm-specific variables. We find that a country's real estate security excess (risk-adjusted) returns are negatively related to its openness. The results are robust across different multi-factor model specifications, and suggest that real property market efficiency may have been enhanced for non-tradable goods such as real estate in globalizing economies.

[1]  E. Fama,et al.  Risk, Return, and Equilibrium , 1971, Journal of Political Economy.

[2]  E. Fama,et al.  Risk, Return, and Equilibrium: Empirical Tests , 1973, Journal of Political Economy.

[3]  J. Frankel.  Measuring International Capital Mobility: A Review , 1992 .

[4]  Crocker H. Liu,et al.  International evidence on real estate securities as an inflation hedge , 1997 .

[5]  Currency Risk in International portfolios , 1995 .

[6]  Real Estate Value Cycles: A Theory of Market Dynamics , 1995 .

[7]  G. Newell,et al.  Assessing Risk for International Real Estate Investments , 1996 .

[8]  J. Mei,et al.  The Predictability of International Real Estate Markets, Exchange Rate Risks and Diversification Consequences , 1996 .

[9]  Piet Eichholtz.  The Stability of the Covariances of International Property Share Returns , 1996 .

[10]  Currency Swaps and International Real Estate Investment , 1997 .

[11]  E. Fama,et al.  Value Versus Growth: The International Evidence , 1997 .

[12]  Sheridan Titman,et al.  Do Real Estate Prices and Stock Prices Move Together? An International Analysis , 1998 .

[14]  K. Rouwenhorst,et al.  Global Real Estate Markets: Cycles and Fundamentals , 1999 .

[15]  International Real Estate Diversification: Empirical Tests using Hedged Indices , 2000 .

[16]  R. Huisman,et al.  The Cross Section of Global Property Share Returns , 2001 .

[17]  John M. Griffin,et al.  Are the Fama and French Factors Global or Country-Specific? , 2002 .

[18]  S. Stevenson.  Bayes-Stein Estimators and International Real Estate Asset Allocation , 2001 .

[19]  William N. Goetzmann,et al.  The Global Real Estate Crash: Evidence from an International Database , 2001 .

[20]  Capital-Labor Ratios and Total Factor Productivity in the Balassa-Samuelson Model , 2002 .

[21]  Martin Hoesli,et al.  What Factors Determine International Real Estate Security Returns , 2004 .

[22]  Hong Wu.  Exchange Risk versus the Value Factor In International Asset Pricing , 2002 .

[23]  David C. Ling,et al.  Commercial Real Estate Return Performance: A Cross-Country Analysis , 2002 .

[24]  International Real Estate Returns: A Multifactor, Multicountry Approach , 2003 .

[25]  Martin Hoesli,et al.  The Determinants of Stock Returns in a Small Open Economy , 2003 .

[26]  G. Karolyi,et al.  International Real Estate Returns: A Multifactor, Multicountry Approach , 2003 .

[27]  Keith H. Black.  Diversification Benefits from Foreign Real Estate Investments , 2003 .

[28]  Globalization and Urban Residential Rents , 2003 .

[29]  Joseph E. Stiglitz,et al.  Globalization and growth in emerging markets and the New Economy , 2003 .

[30]  Martin Hoesli,et al.  International Evidence on Real Estate as a Portfolio Diversifier , 2003 .

[31]  François Bourguignon,et al.  Value Versus Growth , 2003 .

[32]  A. Bardhan,et al.  A note on globalization and urban residential rents , 2004 .

[33]  Craig H. Wisen,et al.  On the Time‐Series Properties of Real Estate Investment Trust Betas , 2005 .

[34]  Karine Gente,et al.  The Balassa-Samuelson Effect in a Developing Country , 2006 .

[35]  T. Geurts,et al.  Risk and Real Estate Investment: An International Perspective , 2009 .

[36]  Jian Yang,et al.  U.S. Monetary Policy Surprises and International Securitized Real Estate Markets , 2009 .