Macroeconomic Risk Factors and the Role of Mispriced Credit in the Returns from International Real Estate Securities

Pavlov, Andrey D.; Steiner, Eva; Wächter, Susan M.

doi:10.1111/1540-6229.12084

Cited by 32 publications

(52 citation statements)

References 68 publications

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“…Similarly, little definitive evidence is available on the relationship between leverage and returns in real estate firms. Again, some find an inverse relationship (Cheng and Roulac , Ling and Naranjo , Sun, Titman and Twite , Giacomini, Ling and Naranjo ), while others find a positive relationship (Giacomini, Ling and Naranjo ), and others yet find no evidence for a significant relationship (Pavlov, Steiner and Wachter ).…”

Section: Empirical Links Between Capital Structure and Firm Performancementioning

confidence: 99%

REIT Capital Structure Choices: Preparation Matters

Pavlov

Steiner

Wächter

2016

Real Estate Economics

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Sun, Titman and Twite find that capital structure risks, namely, high leverage and a high share of short‐term debt, reduced the cumulative total return of U.S. REITs in the 2007–2009 financial crisis. We find that mitigating capital structure risks ahead of the crisis by reducing leverage and extending debt maturity in 2006 was associated with a significantly higher cumulative total return 2007–2009, after controlling for the levels of those variables at the start of the financial crisis. We further identify two systematic cross‐sectional differences between those REITs that reduced capital structure risks prior to the financial crisis and those that did not: the exposure to capital structure risks and the strength of corporate governance. On balance, our findings are consistent with the interpretation of risk‐reducing adjustments to capital structure ahead of the crisis as a component of managerial skill and discipline with significant implications for firm value during the crisis.

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Section: Empirical Links Between Capital Structure and Firm Performancementioning

confidence: 99%

REIT Capital Structure Choices: Preparation Matters

Pavlov

Steiner

Wächter

2016

Real Estate Economics

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“…Some recent studies discuss asset pricing for securitized housing assets (REITs) using factor‐based models (e.g., Abugri & Dutta, ; Breidenbach, Mueller, & Schulte, ; Hung & Glascock, ; Najand, Lin, & Fitzgerald, ; Ooi, Wang, & Webb, ; Pavlov et al, ; Ro & Ziobrowski, , among others). Aside from these works, the literature on asset pricing for real housing assets under factor‐based frameworks is limited (Beracha & Skiba, ; Ho, Addae‐Dapaah, & Glascock, ; Pai & Geltner, ).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Moreover, prior research has devoted considerable attention to credit risk since the burst of housing bubbles in 2007, which evolved into a global financial crisis. In a recent contribution, Pavlov, Steiner, and Wachter (2015), in their pioneering study on the role of the credit factor in I II III IV I II III IV I II III IV I II III IV I II III IV I 2010 2011 2012 2013 real estate markets, incorporate credit market factors into a factor-based pricing model for real estate investment trusts (REITs) in an international context. Foreclosures in many states began to grow in mid-2006 ( Figure 4); strikingly, California's foreclosures jumped from 0.3% in 2005 to 35% in mid-2008, the most dramatic increase among all US states.…”

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confidence: 99%

New sources of housing market risk: Asset pricing for the US state‐level housing markets

Huang

2019

International Finance

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This study develops three novel housing risk factors to explore the sources of risk in US state‐level housing markets. The asset‐pricing models enrich our investigations into housing markets from three perspectives: housing boom–bust, volatile–calm, and factors’ time‐varying impact regimes. The findings indicate that state‐level housing returns all show significant exposure to systemic risk of housing markets, but the demographic and economic factors’ explanatory powers for housing returns differ across markets. Although the liquidity factor is significant under all three frameworks, the inventory and credit factors show significant impacts only in the impact‐switching specification. There are differences in the responses of housing returns to various risk factors and shifts in housing regimes across state housing markets, depending on whether the states exhibited housing bubbles. The results suggest that an effective housing stabilization mechanism must be capable of tracking shifts in the relations between housing markets and risk factors.

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“…For international REIT returns, Edelstein, Qian & Tsang (2011) and Pavlov, Steiner & Wachter (2015) identify importance of governance, legal and accounting principles, as well as the local credit market conditions, in addition to positive links with GDP and inflation and a negative one with term spread. find linkages between REIT returns and the GDP, interest rates, the term spread, stock returns, as well as country, size, and leverage.…”

Section: Literature Reviewmentioning

confidence: 99%

Risk Factors of U.S. Real Estate Investments

Hoesli¹,

Delfim²

2017

24th Annual European Real Estate Society Conference

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This research focuses on macroeconomic risk factors pertaining to the various types of real estate exposure, i.e. direct, listed and non-listed investments. We apply panel model techniques which make it possible to take advantage of both the cross-sectional and time series dimensions of our data. Much emphasis is placed on comparing sensitivities to risk factors across the types of real estate exposure. This is important in order to assess whether indirect (listed and non-listed) exposures react in the same way as direct investments to the macroeconomy and how well such investments replicate direct real estate behavior. The empirical analyses are conducted using U.S. data from 1984Q1 to 2016Q2. Allocations both by sector and geography are considered. For indirect exposures, we also control among other things for size and leverage. The various types of real estate exposure generally respond similarly to risk factors with GDP, money supply, construction costs, expected inflation, and expected economic activity positively impact returns, while the term and credit spreads, unemployment, and unexpected inflation negatively affect returns.

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Macroeconomic Risk Factors and the Role of Mispriced Credit in the Returns from International Real Estate Securities

Cited by 32 publications

References 68 publications

REIT Capital Structure Choices: Preparation Matters

REIT Capital Structure Choices: Preparation Matters

New sources of housing market risk: Asset pricing for the US state‐level housing markets

Risk Factors of U.S. Real Estate Investments

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