Macroeconomic Risk Factors and the Role of Mispriced Credit in the Returns from International Real Estate Securities
Pavlov, Andrey; Steiner, Eva; Wachter, Susan
The benefits of diversification from international real estate securities are generally well established. However, the drivers of international real estate securities returns are insufficiently understood. We jointly examine the empirical implications of three major international asset pricing models that account for broad macroeconomic risk factors. In addition, we develop the hypothesis that an indicator of mispriced credit is significant in explaining the time series variation in international real estate securities returns. We employ the returns generated by a large sample of firms from 20 countries over the period 1999 to 2011 to test our hypothesis. We find support for the predictions of the major international asset pricing models. We also find evidence in favour of our hypothesised link between local credit conditions and the performance of international real estate securities.
real estate investment firms; international asset pricing; macroeconomic risk factors; credit markets
Required Publisher Statement: © Wiley. Final version published as: Pavlov, A., Steiner, E., & Wachter, S. (2015). Macroeconomic risk factors and the role of mispriced credit in the returns from international real estate securities. Real Estate Economics, 43(1), 241-270. doi: 10.1111/1540-6229.12084 Reprinted with permission. All rights reserved.