1 / 29

Coskewness in European Real Estate Equity Returns Tobias Dechant Kai-Magnus Schulte

Coskewness in European Real Estate Equity Returns Tobias Dechant Kai-Magnus Schulte. Coskewness in European Real Estate Equity Returns Aim of the Paper pricing of European real estate equities cross-section relationship between coskewness and European real estate equity returns

theo
Download Presentation

Coskewness in European Real Estate Equity Returns Tobias Dechant Kai-Magnus Schulte

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Coskewness in European Real Estate Equity Returns • Tobias Dechant • Kai-Magnus Schulte

  2. Coskewness in European Real Estate Equity Returns • Aimofthe Paper • pricingof European real estateequities • cross-sectionrelationshipbetweencoskewnessand European real estateequityreturns • higherreturns on equitieswhichcontributenegativelytoequitymarketskewness • Motivation • real estatecharacteristicsdemandfortheanalysisofcoskewness in assetpricing • almostnoevidenceforthe European real estatemarket • someevidencefortheexplanatory power ofcoskewness in global real estateequities

  3. Methodology • Time Series Regressions (Fama & French 1993, 1996, 1997) • rolling time seriesregressionstodeterminefactorriskpremia • Cross SectionRegressions (Fama & McBeth 1973, Harvey & Siddique 2000) • explainingcrosssectionreturndifferencesbyregressingequityreturns on factorriskpremia • Conditional Cross SectionRegressions (Pettengill et al. 1995, 2000) • explainingcrosssectionreturnsdifferencesbyregressingequityreturns on factorriskpremiaconditional on thestateoftheequitymarket

  4. Data • Thomson Reuters Datastream/Global Property Research (GPR) • 16 European countries • June 1988 - June 2009 • datafrequency: monthly • 275 (Ø 102) real estateequities (screeningaccordingto Ince und Porter, 2006) • 9.662 (Ø 3.864)generalequities(screeningaccordingto Ince und Porter, 2006) • currency: Euro • equitymarketreturn: equallyweightedreturn on all availableequities • riskless rate ofreturn: equallyweighted „OneMonth Interbank Rate“ of all 16 countries

  5. Constructing Portfolios • reducingidiosyncraticrisk in returns • sequentialsorting (LiewandVassalou, 2000) • sortingdate: end of June eachyearfrom 1988 to 2009 • sortingcriteria: • marketcapitalisation (ME) • bookequity/marketequity (BE/ME) • breakpoints • ME: quartiles • BE/ME: quartiles • 16 real estateportfoliosfor time seriesregressions

  6. Coskewnessand Asset Pricing (1) • Definition Coskewness • contributionofassetskewnesstoskewnessofthemarketportfolio • preferencefor positive skewness (Kraus & Litzenberger 1976; Scott & Horvath 1980) • assetwhichincreases (decreases) marketskewnessshould, on average, yield a lower (higher) return • expectedprefix in crosssectionregressionsdependent on marketskewness

  7. Coskewness und Asset Pricing (2) • Coskewnessaccordingto Harvey & Siddique (2000) • residualsfrom CAPM regression • unconditionalmeasuresofcoskewness (not dependent on marketskewness) • easierinterpretation in crosssectionregressions

  8. Model (1) • Rolling Time Series Regressions • Determination ofFactorRiskPremia: • modelling time variation in factorriskpremia • rollingwindowof 60 months (check forrobustness: 48 months, 72 months)

  9. Model (2) • Unconditional Cross SectionRegressions • Regression of Equity Returns on Portfolio FactorLoadings (g2i) • monthlycrosssectionregressionsfromJuly 1993 to June 2009 • explainingreturndifferencesbyrollingfactorriskpremia • meanvalueof „gammas“ indicatesexplanatory power

  10. Model (3) • Conditional Cross SectionRegressions • Conditioningcrosssectionregressiondepending on thestateoftheequitymarket • If an assetisclassifiedasriskythere must besomestates in whichitsreturnisbelowthatof a less riskier asset • with

  11. Results (2) – Base Model (EquallyWeighted) • Almostnoexplanatory power ofcoskewnessneitherunconditionalnorconditional

  12. Results (3) – Controlling forWeightingEffects • weakconditionalexplanatory power whenweightingeffectsareconsideredfor

  13. Results (4) – Controlling for Currency Effects • conditionalexplanatory power whencurrencyeffectsarecontrolledfor

  14. Results (1) – Cross SectionResultswithoutCoskewness (EW)

  15. Summary & Implications • Coskewnessand Returns on European Real Estate Equities • noexplanatory power in unconditonalmodels • indicationfortheexplanatory power ofcoskewness in conditionalmodels • explanatory power ofcoskewnessdepends on the model • coskewnessprovestobesignificantwhencurrencyeffectsareconsidered • relationshipbetweenmarketcapitalisation , momentumandcoskewness • RoleofCoskewnessrequires • moreattention in real estateassetpricing • moreresearch

  16. Backup

  17. Ergebnisse (1) – Querschnittsregressionen ohne Coskewness

  18. DescriptiveStatistics

  19. Formung der systematischen Risikofaktoren HML und SMB • Nach Portfolioformierung: S1/B1, S1/B2, S1/B3, S2/B1, S2/B2, S2/B3 • SMB: S1/B1 + S1/B2 + S1/B3 – (S2/B1 + S2/B2 + S2/B3) •  Risikofaktor assoziiert mit der Größe einer Firma • HML: S1/B1 + S2/B1 – (S1/B3 + S2/B3) •  Risikofaktor assoziiert mit der Bewertung einer Firma

  20. Ergebnisse (1) • Zeitreihenregressionen – 6 Portfolien

  21. Ergebnisse (2) • Zeitreihenregressionen – 25 Portfolien: 1988 – 2009

  22. Ergebnisse (3) • Zeitreihenregressionen – 25 Portfolien: 1988 – 1998

  23. Ergebnisse (4) • Zeitreihenregressionen – 25 Portfolien: 1999 – 2009

  24. Coskewnessand Asset Pricing (2) • marketSkewnesscoskewnessexpectedsign (CS) • positive negative • positive • negative negative • positive positive • negative • negative Positive • expectedsign in crosssectionregressionsshouldbeoppositetomarketskewness

  25. Modell (2) • Rollierende Zeitreihenregressionen – Bestimmung der Faktorrisikoprämien • Monatlich rollierend durchgeführte Zeitreihenregressionen von Juni 1988 bis Juni 2008 • Zeitraum jeder einzelnen Regression: 60 Monate • Abbildung der Zeitvariation des systematischen Risikos

  26. Coskewness und Asset Pricing • Empirische Evidenzen • Kraus & Litzenberger (1976) • Friend & Westerfield (1980) • Barone-Adesi (1985) • Fang & Lai (1997) • Harvey and Siddique (2000) • Smith (2007) • Ngyen& Puri (2009)

  27. Coskewness und Asset Pricing (2) • Coskewness nach Harvey & Siddique (2000) • Beide Coskewness-Maße unkonditioniert (nicht abhängig von der Marktschiefe) • Einfachere Interpretation in Querschnittanalysen • Risikomaße rollierend über 60 Monate bestimmt

  28. Model (4) • RobustnessofResults • currencyeffects • weightingeffects • countryeffects

  29. Results (4) – Controlling for Country Effects • conditionalexplanatory power whencountryeffectsareconsideredfor

More Related