Volatility and the Cross-Section of Real Estate Equity Returns during COVID-19

This paper uses the global systemic shock associated with the outbreak of the novel coronavirus COVID-19 to assess the risk-return relationship in the cross-section of real estate equities internationally. I construct a global COVID-19 risk factor to capture the risk exposure of individual stocks to the pandemic. The paper also assesses the low-risk effect puzzle in real estate stocks. I find that the average firm sensitivity to the COVID-19 risk factor increases from close to zero prior to the pandemic to 0.6 during the pandemic with large variations across countries and sectors. Fama-MacBeth regressions reveal evidence for a low-risk effect – both through market and COVID-19 risks – which is not be associated with behavioral biases but rather with financial constraints. Consistent with recent research, the findings in this paper suggest that investors perceive the shock caused by the COVID-19 to be amplified by financial channels

Volatility and the Cross-Section of Real Estate Equity Returns during Covid-19

This paper uses the global systemic shock associated with the outbreak of the novel coronavirus Covid-19 to assess the risk-return relationship in the cross-section of real estate equities in the US and in selected Asian countries. I construct regional Covid-19 Risk Factors (CRFs) to assess how the risk exposure of stocks to the pandemic affects their performance. I find substantial differences between stocks in Asia and the US as a result of the pandemic. During the early stages of the pandemic, the sensitivity of Asian real estate companies to the market becomes negative, while it remains positive and increases in the US. Real estate sectors experience strong divergence in performance in the US while little sectoral difference is observed in Asia. The most affected sectors in the US are retail and hotels, while in Asia it is office. A Fama–MacBeth regression shows evidence for a low-risk effect during the Covid period: while insignificant prior to the pandemic, the return-risk relationship becomes significantly negative during the Covid period, with valuation effects driving the results in both regions. Firms in the US perform significantly worse if their exposure to the pandemic is higher, which is not the case in Asia. The results point towards strong divergence of expectations between US and Asian real estate companies in the onset of Covid-19, which may be associated with the level of prior experience to similar pandemics

Is Financial Regulation Good or Bad for Real Estate Companies? – An Event Study

This study investigates how three regulatory reforms undertaken in the aftermath of the global financial crisis have affected returns of real estate companies. The three reforms are aimed at regulating different segments of the market – Basel III targets banks, and could restrict the availability of bank debt to the sector; the Alternative Investment Fund Management Directive (AIFMD) targets funds, which could increase compliance costs and reduce the potential investor pool; the European Market Infrastructure Regulation (EMIR) is aimed at derivative trading and could impact the cost of debt capital. We employ an event study methodology using daily stock returns of real estate companies and identify the regulatory events through news published in major international financial newspapers and news agencies. Our results show different responses across the three regulations. For Basel III we find support for the regulatory burden hypothesis of the bank lending channel for small real estate firms and firms with low debt-to-equity ratios as they cannot diversify their funding sources. The direct regulatory effect as tested using AIFMD announcements supports the profit-based reaction hypothesis for large firms. We also show that the news have asymmetric effects with tighter regulation news more frequently leading to significant responses in average abnormal returns (AARs) than loosening regulation news

Distance to Headquarter and Real Estate Equity Performance

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

Bank liquidity management through the issuance of bonds in the aftermath of the global financial crisis

Next to deposits, European banks have historically largely used bank obligations such as covered bonds (CB). Their US counterparties, on the contrary, heavily rely on securitization to fund mortgages. We assess how banks’ liquidity and funding position during and after the Global Financial Crisis (GFC) affects the decision to issue (private label) mortgage backed securities (MBS), covered bonds or senior unsecured bonds. Since the decisions to issue either instrument are not necessarily independent from each other, we estimate conditional probit and tobit models in order to account for the simultaneous nature of the issuances. We see that neither instrument plays any role in liquidity management during the GFC. In the post-GFC period, banks reach out to issuing MBS when facing short-term illiquidity. Banks could issue MBS as a way to comply with Basel III liquidity regulations. In turn, a bank’s decision to issue CB is not affected by bank’s liquidity and liquidity management occurs instead through managing the amount of CB. The issuance of SUB is also not affected by liquidity. Overall, the paper shows that only MBS have actively been issued as a response to liquidity shortages of banks’ balance sheets and shows that MBS and CB which often are seen as alternative instruments serve different purposes

Why do natives and non-natives have different housing outcomes? Evidence from Britain

Purpose: In this study, we examine the housing outcomes of natives and multiple generations of non-natives using a longitudinal survey data in Britain. Design/methodology/approach We use longitudinal data from Britain, in which we can observe multiple generations of immigrants and their demographic and economic information. Findings The probability models for housing tenure reveal significant variation in the outcomes which are robust to several econometric specifications. Research limitations/implications Since migration and its impact on local economy is highly debated topic across several major regions of the world, the findings bring out important insights with policy implications. The research is limited by the sample size of the longitudinal survey. Originality/value The empirical evidence on the topic is quite limited with mixed findings. Especially, our ability to look through multiple generations is unique in identifying the variation in housing outcomes for the native and non-native citizens

Supporting smart urban growth: successful investing in density

This report analyses the characteristics of ‘good density’ and begins to quantify the relation-ship between these characteristics, investor returns, and carbon emissions. We found that cities with good density – that is, dense development thoughtfully designed to promote a high quality of life – are likely to be more resilient and prosperous in the long term, and there-fore more likely to provide sustainable returns for investors, than cities without good density. Based on a quantitative analysis of 63 global cities, the report finds that cities with good density are associated with higher returns, capital values, and levels of investment flows for commercial real estate. The research provides evidence of important issues for the long-term resilience of cities both in the OECD and in fast-growing developing regions

The Pricing of Spatial Linkages in Companies’ Underlying Assets

Spatial linkages in returns have not yet received much attention in an asset pricing context, however, they can capture important information about idiosyncratic externalities associated with firms’ holdings. We explain returns of real estate companies by modelling the spatial comovement across their underlying assets. We connect stocks of real estate firms using the location of their property portfolios and show that spatial linkages across real estate assets explain some of the variation in abnormal returns, controlling for exposure to systematic factors and firm characteristics. We propose a trading strategy that exploits the information contained in the spatial linkages of the underlying assets. We show that a long-short hedge that sells the stocks that experience a drop in the price if their connected stocks have also gone down in price and buys the stocks that experience an increase in the price if their connected stocks have also gone up delivers a non-market return of 9.7% per year

Expression of sialyltransferases from the St3gal, St6gal and St6galnac families in mouse skeletal muscle and mouse C2C12 myotubes

In skeletal muscles, the sialic acids have a great significance for their functional maintenance and proper structural organization. Our work described the expressions of St3gal, St6gal and St6galnac sialyltransferases specific for glycoproteins in mouse skeletal muscles and murine C2C12 myotubes. Lectin histochemistry, cytochemistry and lectin blot were used to demonstrate the membrane localization and the electrophoretic profiles of α-2,3- and α-2,6-sialylated glycoproteins. The expression levels of sialyltransferases were analysed by real time RT-PCR and western blot. The enzymes St6gal2 and St6galnac1 were not expressed in skeletal muscle tissue and C2C12 myotubes. In both experimental groups, mRNAs of the St3gal family prevailed over the mRNA expressions of the St6gal and St6galnac families. The profiles of sialyltransferase expressions showed differences between the two experimental groups, illustrated by the absence of expressions of the mRNA for the St3gal6 and St6galnac3 genes in the C2C12 cell samples and by the different shares of the enzymes St3gal3 and St3gal4 in both experimental groups. The different patterns of enzyme expressions in both experimental groups corresponded with differences between their α-2,3- and α-2,6-sialylated glycoprotein profiles. These results could be a useful addendum to the knowledge concerning the glycosylation of the skeletal muscle tissue