Risk Measurement and Listed Property Trust Investment Strategies : Focusing on the Downside

Peng, Vincent S.

doi:10.1080/14445921.2005.11104182

Cited by 5 publications

(6 citation statements)

References 9 publications

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“…Panel A in Table II reveals that standard deviation exhibits higher risk than downside deviation. The results are also consistent with the previous studies on downside risk framework such as Peng (2005) and Sing and Ong (2000).…”

Section: Resultssupporting

confidence: 92%

“…Previous research by Bawa (1975) and Fishburn (1977) have also highlighted the limitations in CAPM which assumes that investors' utility functions are irrelevant in asset pricing and all asset return distributions are normally distributed. In a real estate context, the normal distribution assumption in real estate returns has been rejected by previous studies (Graff et al , 1997; Myer and Webb, 1993, 1994; Peng, 2005). Therefore, CAPM may provide misleading results when it is analysed under a non‐normality distribution.…”

Section: Literature Reviewmentioning

confidence: 98%

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Listed property trusts and downside systematic risk sensitivity

Lee

Robinson²,

Reed³

2008

Journal of Property Investment &Amp; Finance

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PurposeThis paper aims to identify and examine the determinants of downside systematic risk in Australian listed property trusts (LPTs).Design/methodology/approachCapital asset pricing model (CAPM) and lower partial moment‐CAPM (LPM‐CAPM) are employed to compute both systematic risk and downside systematic risk. The methodology of Patel and Olsen and Chaudhry et al. is adopted to examine the determinants of systematic risk and downside systematic risk.FindingsThe results confirm that systematic risk and downside systematic risk can be individually identified. There is little evidence to support the existence of linkages between systematic risk in Australian LPTs and financial/management structure determinants. On the other hand, downside systematic risk is directly related to the leverage/management structure of a LPT. The results are also robust after controlling for the LPTs' investment characteristics and varying target rates of return.Practical implicationsInvestors and real estate analysts should conscious with the higher returns from high leverage and internally managed LPTs. Although there is no evidence that these higher returns are related to higher systematic risk, there could be the compensation for higher downside systematic risk.Originality/valueThis study provides invaluable insights into the management of real estate risk in Australian LPTs with implications for REITs in other countries. Unlike previous studies of systematic risk in REITs or LPTs, this is the first study to assess downside systematic risk and explore the determinants of downside systematic risk in LPTs.

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Section: Resultssupporting

confidence: 92%

Section: Literature Reviewmentioning

confidence: 98%

Listed property trusts and downside systematic risk sensitivity

Lee

Robinson²,

Reed³

2008

Journal of Property Investment &Amp; Finance

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“…Hence, it supported that downside risk is a more superior optimisation model. In Australia, Peng (2005) found similar results for a three-asset portfolio (direct real estates, LPTs and stocks) and concluded that different portfolio allocations can be obtained by using the mean-variance and downside risk optimisations. Sing and Ling (2003) employed the downside risk framework and the results showed that the Singapore LPTs, especially the office and retail LPTs, offer diversification potential to investors.…”

Section: Malaysian Securitised Real Estatementioning

confidence: 63%

“…These assumptions have been rejected by numerous property and finance studies (Myer and Webb, 1993;Ang et al, 2006). Moreover, downside risk has been successfully applied into different property markets such as the USA (Sivitanides, 1998;Cheng, 2001), Singapore (Sing and Ong, 2000), Australia (Peng, 2005;Lee et al, 2008b;Lee, 2009) and Germany (Maurer and Reiner, 2002).…”

Section: Malaysian Securitised Real Estatementioning

confidence: 99%

The role of Malaysian securitised real estate in a mixed‐asset portfolio

Lee

Ting

2009

Journal of Financial Management of Property and Construction

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Purpose -Previous studies on the Malaysian securitised real estate market have largely emphasised on performance analysis, whereas the importance of securitised real estate in asset allocation is largely ignored. Therefore, the purpose of this paper is to examine the role of Malaysian property shares and real estate investment trusts (REITs) in a mixed-asset portfolio from 1991 to 2006. Design/methodology/approach -The mean-variance and downside risk optimisations were utilised to assess the role of REITs and property shares in a mixed-asset portfolio allocation. More specifically, the portfolio diversification potential and return enhancement benefits for both assets were examined. Findings -The results showed that property shares offer little diversification benefits or portfolio return enhancement, whereas the equally weighted REITs portfolio does provide some diversification benefits and return enhancements under the mean-variance and downside risk frameworks. However, the benefits have diminished in recent years. Besides, the results also revealed that the equally-and value-weighted REIT portfolios do behave differently. Research limitations/implications -This study has several important implications for investors. Importantly, investors should consider the inclusion of REITs rather than property shares in their portfolios. Originality/value -This paper is one of few studies in emerging markets, although Malaysia was the first country to introduce REITs in Asia. Additionally, it could be the first attempt to assess the downside risk of Malaysian securitised real estate.

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“…Lu and Mei (1999) documented similar results for other emerging property share markets. Note that Peng (2005) also found that Australian LPTs in general are positively skewed.…”

Section: Literature Reviewmentioning

confidence: 81%