A COMPARATIVE ASSESSMENT OF GENERAL STOCKS, PROPERTY STOCKS AND DIRECT PROPERTY INVESTMENT
LAI CHONG YEW
LAI CHONG YEW
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Abstract
Previous studies on the relationship with property stocks and direct property market do not yet have a consensus on whether the property stock market is integrated with the real estate market. This study assesses the performance of general stocks, property stocks and the direct property market and their linkages over the period 1987 Q1 to 2004 Q4. It finds that although property stocks provided a higher mean return for the full period of analysis, the residential property market was the best performer on a risk adjusted basis. However, there is a lack of consistency in the performance ranking of all the portfolios, which may suggest
different adjustment speeds to equilibrium conditions. The study finds that property stocks provide a useful source of information on the physical property market. The performance of the property shares was found to lead that of the residential sector by one quarter and the office, shop and industrial sectors by four quarters. It was also found that by investing in property stocks, investors are able to capture some portion of the property market returns as a common property element is evident in the property stocks and office series. Finally, the results from the Granger causality tests showed that with the exception of shop spaces,
property stock returns Granger caused direct property market returns.
Keywords
Property stocks, Property market
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Date
2005
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