Please use this identifier to cite or link to this item:
|Title:||The Relationships between Real Estate Price and Expected Financial Asset Risk and Return: Theory and Empirical Evidence|
Risk and return
|Source:||Fan, G.-Z., Huszár, Z.R., Zhang, W. (2013). The Relationships between Real Estate Price and Expected Financial Asset Risk and Return: Theory and Empirical Evidence. Journal of Real Estate Finance and Economics 46 (4) : 568-595. ScholarBank@NUS Repository. https://doi.org/10.1007/s11146-012-9376-x|
|Abstract:||In pricing real estate with indifference pricing approach, market incompleteness is shown to significantly alter the conventional pricing relationships between real estate and financial asset. Specifically, we focus on the pricing implication of market comovement because comovement tends to be stronger in financial crisis when investors are especially sensitive to price declines. We find that real estate price increases with expected financial asset return but only in weak market comovement (i. e., a normal market environment) when investors enjoy diversification benefit. When market comovement is strong, real estate price strictly declines with expected financial asset return. More importantly, contrary to the conventional positive relationship from real option studies, real estate price generally declines with expected financial asset risk. With realistic market parameters, we show that there is a nonlinear relationship between real estate price and financial risk. When the market comovement is strong, real estate price only increases with financial asset risk when the risk is low but eventually declines with the risk when it becomes high. Our cross-country empirical results also show that the relationship between financial market risk and real estate price is non-monotonic, conditional on the degree of market comovement. © 2012 Springer Science+Business Media, LLC.|
|Source Title:||Journal of Real Estate Finance and Economics|
|Appears in Collections:||Staff Publications|
Show full item record
Files in This Item:
There are no files associated with this item.
checked on Feb 27, 2018
WEB OF SCIENCETM
checked on Feb 14, 2018
checked on Mar 12, 2018
Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.