Volatility and the Cross-Section of Real Estate Equity Returns during COVID-19

Milcheva, Stanimira

doi:10.2139/ssrn.3599211

Cited by 23 publications

(16 citation statements)

References 39 publications

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“…Our study relates to the fast-growing literature examining the COVID-19 pandemic on firms and the economy (e.g., Alfaro et al 2020;Baker et al 2020;Chen et al 2020;De Vito and Gomez 2020;Gerding et al 2020;Ozili and Arun 2020;Schoenfeld 2020). In particular, we are among the first several studies on the real estate market (Akinsomi 2020;D'Lima et al 2020;Ling et al 2020;Milcheva 2020;Xie and Milcheva 2020;Van Dijk et al 2020;Zhao 2020). Since the illiquidity and opaqueness of private commercial real estate markets limit the ability to detect rent and price movement in real time (Ling et al 2020), most of these concurrent studies look at stock market responses of REITs and real estate equities in forming expectations of the pandemic for the real estate market (Akinsomi 2020;Ling et al 2020;Milcheva 2020;Xie and Milcheva 2020).…”

Section: Introductionmentioning

confidence: 81%

The COVID-19 Pandemic and Commercial Property Rent Dynamics

Allan¹,

Liusman

Lu³

et al. 2021

JRFM

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This paper utilizes timely proprietary data to examine the contemporary impact of the COVID-19 pandemic on commercial property rent dynamics in the Asia–Pacific region. Given that the Asia–Pacific region was the first to be impacted by the public health crisis, it is important to examine how the COVID-19 pandemic has affected the real estate markets in this region and to assess how the region has been recovering since then. Our regression analysis, controlling for different macroeconomic fundamentals and city and property type fixed effects, documents substantial declines in rents of approximately 15% during the first six months of 2020 across the Asia–Pacific commercial property market. We further observe that the most significant declines in rent occur in regions where exposure to the COVID-19 pandemic is the more severe, and in the retail property sector, where we have been observing continued declines of over 30%, with little recovery as of the second quarter of 2020. In additional analysis, we examine capital values and show that while capital targeting the retail property sector has been muted, there is some evidence showing capital flows into the residential and industrial sectors. We also show that fiscal stimuli imposed by governments have moderated the adverse impact of the pandemic. Overall, our study shows that while the effect of the COVID-19 public health crisis is detrimental to commercial real estate, its impact varies significantly across different regions and property sectors.

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Section: Introductionmentioning

confidence: 81%

The COVID-19 Pandemic and Commercial Property Rent Dynamics

Allan¹,

Liusman

Lu³

et al. 2021

JRFM

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“…Another contribution is the invention of a Covid-19 Risk Factor to assess a company's susceptibility to Covid-19 risks. The risk factor is unrelated to other stock market factors and arises because of the repeated volatility in global Covid-19 events recorded (Milcheva, 2020).…”

Section: Literature Reviewmentioning

confidence: 99%

The Effect of Covid-19 on the Real Estate Industry in India

Sanchaniya

2021

Baltic Journal of Real Estate Economics and Construction Management

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The world economy seems to be experiencing one of the most severe downturns in recent memory. The latest pandemic has had a detrimental effect on the economies of several nations, including India. The International Monetary Fund forecast India’s growth rate at 1.9 % for fiscal year 2021, down from 5.8 % previously. This poses a significant challenge to the Indian economy. The resumption of work was complicated by the workers’ surprising return to the employers from underground. Developers struggled to locate enough job-creating jobs due to the labour market severe constraints. The populace is burdened by the great pestilence that threatens the nation. Indian real estate, which was still emerging from the implications of demonetization (November 2016) and other changes, was jolted by this pandemic, with building development halted and real estate transactions paused. Indian real estate should plan itself for a post-COVID-19 environment and be prepared to take several new and technology-driven moves to get back on track. The secondary data research methodology is used in this paper and the aim of the research is to discuss the pre-pandemic real estate market and the effect of COVID-19 on the Indian real estate market. Additionally, it discusses the risks and prospects confronting various real estate industry participants.

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“…Apart from the research on the three topics above, there are also two other issues directly relevant to real estate returns: the inflation-hedging ability of real estate (Hoesli et al, 2008) and real estate portfolio diversification (Addae-Dapaah et al, 2002). Real estate investment trust (REIT) returns (Lizieri et al, 2007), land returns (Jadevicius et al, 2018) and real estate equities (Milcheva, 2020) have also received attention from researchers.…”

Section: Identification Of Real Estate Return Determinantsmentioning

confidence: 99%

International Real Estate Review

Wang¹,

Hartzell²

2021

IRER

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We apply the dynamic Gordon growth model to the Hong Kong real estate market to analyze quarterly data on four kinds of real estate—housing, office, retail, and factory properties—from 1999 to 2020. We find that factories have the highest total returns among the four types of real estate, and also a larger Sharpe ratio. The total returns of these four kinds of real estate are highly correlated. The results of an autoregressive distributed lag model show that the gross domestic product growth rate is the key determinant of real estate returns, while changes in foreign direct investment also influence housing and retail returns. The expected value of the risk-free rate is the key factor that determines the rent-price ratio. The decline in the risk-free rate in Hong Kong is the main reason that the real estate price-rent ratio has increased from 20 to 40 in the last twenty years. Our research represents an early contribution that compares the performance of housing and commercial real estate at the city level, with both types of real estate having similar determinants. Finally, we find that the fall in risk-free interest rates worsens housing affordability in Hong Kong.

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Volatility and the Cross-Section of Real Estate Equity Returns during COVID-19

Cited by 23 publications

References 39 publications

The COVID-19 Pandemic and Commercial Property Rent Dynamics

The COVID-19 Pandemic and Commercial Property Rent Dynamics

The Effect of Covid-19 on the Real Estate Industry in India

International Real Estate Review

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