The Other Side of Value: The Effect of Quality on Price and Return in Real Estate

Sara Kelly Anzinger, Chinmoy Ghosh, Milena Petrova

Research output: Contribution to journalArticlepeer-review

3 Scopus citations


We examine the effect of quality on price and return in real estate. Quality real estate stocks generally trade at higher prices. However, similar to findings in the aggregate stock market (Asness et al. 2013), quality in listed real estate is not fully reflected in price. A long quality, short junk portfolio (QMJ) is found to produce average risk-adjusted returns of 3.6 % per quarter (14.4 % annually). QMJ has a significantly positive coefficient when added as a dependent variable to a 4-factor model explaining U.S. real estate excess returns, including market, size, value and momentum factors, and leads to a small improvement in the overall fit of the model. Further investigation of the components of quality shows that profitability has a consistently positive relationship with real estate excess returns, while higher dividend payout is consistently associated with lower returns, in contrast to findings for conventional firms.

Original languageEnglish (US)
Pages (from-to)429-457
Number of pages29
JournalJournal of Real Estate Finance and Economics
Issue number3
StatePublished - Apr 1 2017


  • Firm performance
  • Quality attributes
  • Real estate prices
  • Real estate returns

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Urban Studies


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