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Estimating Real Estate's Systematic Risk from Aggregate Level Appraisal‐Based Returns
Author(s) -
Geltner David
Publication year - 1989
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00504
Subject(s) - systematic risk , real estate , economics , econometrics , capitalization rate , consumption smoothing , stock (firearms) , smoothing , financial economics , market risk , investment (military) , actuarial science , real estate investment trust , business cycle , finance , statistics , mathematics , macroeconomics , politics , political science , law , mechanical engineering , engineering
This paper estimates the systematic risk (or “beta”) of unsecuritized investment grade commercial real estate, as represented by the FRC and PRISA indices of institutional real estate holdings. Systematic risk defined with respect to national consumption is compared to systematic risk defined with respect to the stock market. Also, the risk estimates are explicitly adjusted to account for “smoothing” in appraisal‐based aggregate level returns data. The systematic risk of these real estate indices appears to be virtually zero with respect to the stock market, even after correcting for smoothing, but substantially positive with respect to national consumption.