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Property company performance and real interest rates: a regime-switching approach

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  • Colin Lizieri
  • Stephen Satchell

Abstract

Quantitative analysis of property performance has tended to rely on linear models. This paper explores the possible insights of using non-linear, regime based models. It is argued that there may exist different regimes depending on the level of real interest rates. This is tested empirically using a Threshold Autoregressive (TAR) model on property company data. It is found that behaviour differs in high interest rate and low interest rate regimes.

Suggested Citation

  • Colin Lizieri & Stephen Satchell, 1997. "Property company performance and real interest rates: a regime-switching approach," Journal of Property Research, Taylor & Francis Journals, vol. 14(2), pages 85-97, January.
    • Handle: RePEc:taf:jpropr:v:14:y:1997:i:2:p:85-97
    DOI: 10.1080/095999197368654
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    References listed on IDEAS

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    1. C. Lizieri & S. Satchell, 1994. "Property shares and the equity market: exploring the linkages," ERES eres1994_132, European Real Estate Society (ERES).
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    Cited by:

    1. Graham Partington & Max Stevenson, 2001. "The probability and timing of price reversals in the property market," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 22(7), pages 389-398.
    2. Michael Ball, 2002. "Cultural Explanation of Regional Property Markets: A Critique," Urban Studies, Urban Studies Journal Limited, vol. 39(8), pages 1453-1469, July.
    3. Maddalena Cavicchioli, 2016. "Statistical Analysis Of Mixture Vector Autoregressive Models," Scandinavian Journal of Statistics, Danish Society for Theoretical Statistics;Finnish Statistical Society;Norwegian Statistical Association;Swedish Statistical Association, vol. 43(4), pages 1192-1213, December.
    4. Kuang-Liang Chang & Nan-Kuang Chen & Charles Leung, 2011. "Monetary Policy, Term Structure and Asset Return: Comparing REIT, Housing and Stock," The Journal of Real Estate Finance and Economics, Springer, vol. 43(1), pages 221-257, July.
    5. Chris Brooks & Sotiris Tsolacos, 2001. "International Evidence of the Predictability of Prices of Securititised Real Estate Assets: Econometric Models versus Neural Networks," ICMA Centre Discussion Papers in Finance icma-dp2001-08, Henley Business School, University of Reading.
    6. Norman Hutchison & Patricia Fraser & Alastair Adair & Rahul Srivatsa, 2012. "Regime shifts in ex post UK commercial property risk premiums," Journal of Property Research, Taylor & Francis Journals, vol. 29(3), pages 247-269, April.
    7. Colin Lizieri & Charles Ward, 2000. "Commercial Real Estate Return Distributions: A Review Of Literature And Empirical Evidence," Real Estate & Planning Working Papers rep-wp2000-01, Henley Business School, University of Reading.
    8. Shaukat, Mughees, 2010. "The Benefits and Importance of Commercial Real Estate," MPRA Paper 28268, University Library of Munich, Germany.
    9. Gerald R. Brown & George A. Matysiak, 1998. "Valuation smoothing without temporal aggregation," Journal of Property Research, Taylor & Francis Journals, vol. 15(2), pages 89-103, January.
    10. Carolyn W. Chang & Kian Guan Lim & Zhi Min Zhang, 2024. "Leverage Strategies of Real Estate Investment Trusts and Real Estate Operating Companies," International Real Estate Review, Global Social Science Institute, vol. 27(1), pages 81-115.
    11. Chris Brooks & Sotiris Tsolacos, 2003. "International evidence on the predictability of returns to securitized real estate assets: econometric models versus neural networks," Journal of Property Research, Taylor & Francis Journals, vol. 20(2), pages 133-155, January.
    12. Muktar Babatunde Wahab & Wasiu Ayobami Durosinmi & Matthew Mamman & Dodo Usman Zakari & Adetoye Sulaiman Adepoju, 2021. "Macroeconomic Dynamics in Real Estate Market amid Covid-19 Pandemic in Abuja, Nigeria," AfRES 2021-002, African Real Estate Society (AfRES).
    13. Patrick Krieger & Carsten Lausberg & Kristin Wellner, 2018. "Einblicke in die Gründe für nicht-normalverteilte Immobilienrenditen: eine explorative Untersuchung deutscher Wohnimmobilienportfolios [Insights into the reasons for non-normal real estate returns:," Zeitschrift für Immobilienökonomie (German Journal of Real Estate Research), Springer;Gesellschaft für Immobilienwirtschaftliche Forschung e. V., vol. 4(1), pages 49-79, November.
    14. Alexey Akimov & Simon Stevenson, 2013. "Securitised Real Estate Regime-Switching Behaviour and the Relationship with Market Interest Rates," ERES eres2013_346, European Real Estate Society (ERES).
    15. Jamie Alcock & Petra Andrlikova, 2018. "Asymmetric Dependence in Real Estate Investment Trusts: An Asset-Pricing Analysis," The Journal of Real Estate Finance and Economics, Springer, vol. 56(2), pages 183-216, February.
    16. Kun Duan & Tapas Mishra & Mamata Parhi & Simon Wolfe, 2019. "How Effective are Policy Interventions in a Spatially-Embedded International Real Estate Market?," The Journal of Real Estate Finance and Economics, Springer, vol. 58(4), pages 596-637, May.
    17. Chris Brooks & Sotiris Tsolacos, 2001. "Linkages between property asset returns and interest rates: evidence for the UK," Applied Economics, Taylor & Francis Journals, vol. 33(6), pages 711-719.
    18. Kieran Farrelly & Ben Sanderson, 2005. "Modelling Regime Shifts in the City of London Office Rental Cycle," Journal of Property Research, Taylor & Francis Journals, vol. 22(4), pages 325-344, December.
    19. Alexey Akimov & Simon Stevenson & Maxim Zagonov, 2015. "Public Real Estate and the Term Structure of Interest Rates: A Cross-Country Study," The Journal of Real Estate Finance and Economics, Springer, vol. 51(4), pages 503-540, November.
    20. Weis Christian & René-Ojas Woltering & Steffen Sebastian, 2017. "The Interest Rate Sensitivity of Value and Growth Stocks - Evidence from Listed Real Estate," ERES eres2017_325, European Real Estate Society (ERES).

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