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Systematic Property Risk: Quantifying Uk Property Betas 1983-2005

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  • Alan Gardner
  • George A. Matysiak

Abstract

The increased frequency in reporting UK property performance figures, coupled with the acceptance of the IPD database as the market standard, has enabled property to be analysed on a comparable level with other more frequently traded assets. The most widely utilised theory for pricing financial assets, the Capital Asset Pricing Model (CAPM), gives market (systematic) risk, Beta, centre stage. This paper seeks to measure the level of systematic risk (Beta) across various property types, market conditions and investment holding periods. This paper extends the authorsí previous work on investment holding periods and how excess returns (Alpha) relate to those holding periods. We draw on the uniquely constructed IPD/Gerald Eve transactions database, containing over 20,000 properties over the period 1983-2005. This research is aimed at quantifying the risk premium inherent across property types and looks at the stability of those premia over the last 22 years. It allows us to confirm our initial findings that properties held over longer periods perform, to a large extent, in line with overall market performance. One implication of this is that over the long-term portfolio performance may be no different from an index tracking approach.

Suggested Citation

  • Alan Gardner & George A. Matysiak, 2006. "Systematic Property Risk: Quantifying Uk Property Betas 1983-2005," ERES eres2006_197, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2006_197
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    References listed on IDEAS

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    1. Brown, Gerald R & Matysiak, George A, 2000. "Sticky Valuations, Aggregation Effects, and Property Indices," The Journal of Real Estate Finance and Economics, Springer, vol. 20(1), pages 49-66, January.
    2. Geltner, David Michael, 1991. "Smoothing in Appraisal-Based Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 4(3), pages 327-345, September.
    3. 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.
    4. Booth, P. M. & Marcato, G., 2004. "The Measurement and Modelling of Commercial Real Estate Performance," British Actuarial Journal, Cambridge University Press, vol. 10(1), pages 5-61, April.
    5. David Collett & Colin Lizieri & Charles Ward, 2003. "Timing and the Holding Periods of Institutional Real Estate," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(2), pages 205-222, June.
    6. Alexander, Gordon J. & Chervany, Norman L., 1980. "On the Estimation and Stability of Beta," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(1), pages 123-137, March.
    7. N/A, 1991. "Appraisal," National Institute Economic Review, National Institute of Economic and Social Research, vol. 138(1), pages 3-5, November.
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    Cited by:

    1. Carsten Lausberg & Stephen Lee & Moritz Müller & Cay Oertel & Tobias Schultheiß, 2020. "Risk measures for direct real estate investments with non-normal or unknown return distributions," Zeitschrift für Immobilienökonomie (German Journal of Real Estate Research), Springer;Gesellschaft für Immobilienwirtschaftliche Forschung e. V., vol. 6(1), pages 3-27, April.

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    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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