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Distance to Headquarter and Real Estate Equity Performance

Author

Listed:
  • Stanimira Milcheva

    (University College London, UCL)

  • Yildiray Yildirim

    (Baruch College, City University New York)

  • Bing Zhu

    (Technical University of Munich)

Abstract

We study the effect of geographic portfolio diversification of real estate firms on their investment performance before and after the global financial crisis (GFC). In addition to previously used dispersion metrics, we also account for the distance of the properties to the corporate headquarters. We document a notable shift in the non-market performance of real estate companies after the crisis. Pre-GFC, we do not find a difference in non-market performance across equities based on geographic diversification. Post-GFC, equities with high geographic dispersion significantly outperform the market, while firms with concentrated property holdings do not deliver a significant alpha. Increased real estate equity market sophistication and strong institutional presence can explain why this effect is only observed for dispersed small firms, those invested outside gateway metro areas, or companies with low institutional ownership.

Suggested Citation

  • Stanimira Milcheva & Yildiray Yildirim & Bing Zhu, 2021. "Distance to Headquarter and Real Estate Equity Performance," The Journal of Real Estate Finance and Economics, Springer, vol. 63(3), pages 327-353, October.
    • Handle: RePEc:kap:jrefec:v:63:y:2021:i:3:d:10.1007_s11146-020-09767-4
    DOI: 10.1007/s11146-020-09767-4
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    Cited by:

    1. Daniel Broxterman & Tingyu Zhou, 2023. "Information Frictions in Real Estate Markets: Recent Evidence and Issues," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 203-298, February.
    2. Lingxiao Li & Bing Zhu, 2024. "REITs’ Stock Return Volatility: Property Market Risk Versus Equity Market Risk," The Journal of Real Estate Finance and Economics, Springer, vol. 69(3), pages 452-476, October.
    3. Avis Devine & Isabelle Jolin & Nils Kok & Erkan Yönder, 2024. "How Gender Diversity Shapes Cities: Evidence from Risk Management Decisions in REITs," Journal of Business Ethics, Springer, vol. 189(4), pages 723-741, February.

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    More about this item

    Keywords

    Distance to headquarter; Real estate returns;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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