CONTRARIAN REAL ESTATE INVESTMENT

Abstract

The profitability of contrarian investment strategy (i.e. investing in value stocks) is one of the most well-established empirical facts in the finance literature. Yet. it has not been applied to real estate. Thus, the dissertation examines the contrarian investment strategy in relation to real estate to fill the gap in the literature and ascertain the comparative advantage(s) (in terms of performance) of "value" and "growth" properties. After reviewing the literature germane to the topic, a case study of six cities in the Asia Pacific over the period Q2 1992 through Q1 2002 is being carried out. It was found that contrarian investment strategy is generally superior to growth property investment. Melbourne, Hong Kong and Manila produced statistically signilicant positive "valuegrowth spreads" to imply that the value properties outperformed the growth properties. On the other hand, although the negative value-growth returns spreads for Auckland, Singapore and Kuala Lumpur suggest that growth properties outperformed value properties, the negative value-growth spreads are not statistically significant. Furthermore, the efficient frontiers for value properties portfolios dominate the frontiers for growth properties portfolios to attest to the superior performance of the contrarian investment strategy.