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Asset pricing, spatial linkages and contagion in real estate stocks

Milcheva, S. and Zhu, B. (2018) Asset pricing, spatial linkages and contagion in real estate stocks. Journal of Property Research, 35 (4). pp. 271-295. ISSN 1466-4453

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To link to this item DOI: 10.1080/09599916.2018.1485725


Following recent methodological developments, we estimate a spatial multi-factor model (SMFM) which combines asset pricing techniques with spatial econometrics to assess systemic implications for REIT index returns. We distinguish between comovement due to market risk exposure (systematic risk) and comovement due to linkages between markets (spillover risk). We find that the spillover risk dramatically increases during the global financial crisis and can explain up to 60% of total asset variation. In the rest of the time, idiosyncratic risks have been the predominant type of risk in real estate stocks. Our results have implications for investors showing that the market can channel asset volatility leading to contagion during crisis periods and therefore residual linkages between country indices need to be accounted for as a means of assessing the diversification benefits of a global portfolio.

Item Type:Article
Divisions:Henley Business School > Real Estate and Planning
ID Code:77508


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