Securitized Real Estate and its Link with Financial Assets and Real Estate: An International Analysis

Authors: Martin Hoesli and Camilo Serrano Moreno

Start Page: 57
End Page: 84
Volume: 15
Issue Number: 1
Year: 2007
Publication: Journal of Real Estate Literature

Abstract:
This paper provides cross-country evidence of the link between securitized real estate and stocks, bonds, and direct real estate. First, the behavior of betas in sixteen countries is examined and then the causes of their variation are identified. Second, securitized real estate returns are regressed on ‘‘pure’’ stock, bond, and real estate factors. The betas are generally found to decrease over the 1990–2004 period, but the causes for such decline differ across countries. Securitized real estate returns are found to be positively associated with stock and direct real estate returns, but negatively related to bond returns. Financial assets contribute greatly to the variance of securitized real estate, while the impact of direct real estate is limited. However, a large fraction of the variance is not accounted for by these factors, especially in the United States, which suggests that other factors are at play.