TY - JOUR
T1 - The Other Side of Value
T2 - The Effect of Quality on Price and Return in Real Estate
AU - Anzinger, Sara Kelly
AU - Ghosh, Chinmoy
AU - Petrova, Milena
N1 - Publisher Copyright:
© 2016, Springer Science+Business Media New York.
PY - 2017/4/1
Y1 - 2017/4/1
N2 - 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.
AB - 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.
KW - Firm performance
KW - Quality attributes
KW - Real estate prices
KW - Real estate returns
UR - http://www.scopus.com/inward/record.url?scp=84989159431&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84989159431&partnerID=8YFLogxK
U2 - 10.1007/s11146-016-9574-z
DO - 10.1007/s11146-016-9574-z
M3 - Article
AN - SCOPUS:84989159431
SN - 0895-5638
VL - 54
SP - 429
EP - 457
JO - Journal of Real Estate Finance and Economics
JF - Journal of Real Estate Finance and Economics
IS - 3
ER -