Real Estate Risk and Hedge Fund Returns
BrentW. Ambrose1 & Charles Cao2 & Walter D’Lima3

Abstract

We explore a new investment dimension relating hedge fund exposure to the
real estate market. Using fund level data from 1994 to 2012 from a major hedge fund
data vendor, we identify 1,321 hedge funds as having significant exposure to direct or
securitized real estate. We test for the economic impact of real estate exposure. Our
analysis shows that real estate exposure does not increase fund performance.

An Investigation into Sentiment-Induced Institutional
Trading Behavior and Asset Pricing in the REIT Market
Prashant K. Das & Julia Freybote & Gianluca Marcato
Published online: 3 October 2014

Abstract

Institutional investors such as pension funds or insurance companies commonly
invest in the unsecuritized and securitized real estate market.We investigate how
institutional investor sentiment in the commercial real estate market affects institutional
trading behavior in the REIT market and subsequently asset pricing. In particular, we
test two alternative theories – flight to liquidity and style investing theory – to explain
the sentiment-induced trading behavior of institutional investors in the REIT market for
the pre-crisis (2002–2006), crisis (2007–2009) and post-crisis (2010–2012) period. We
find that the applicability of either theory depends on economic conditions. In the precrisis
period institutional investors switched capital in and out of REITs based on their
sentiment in the private market (style investing). However, in the crisis period institutional
investors switched capital from the illiquid private market to the more liquid
REIT market (flight to liquidity). The flight to more liquid REITs continued into the
post-crisis to a lesser extent and suggests that the financial crisis has changed institutional
investment behavior. Our findings hold across different groups of REITs (e.g.
high and low institutional ownership, S&P and non-S&P REITs) and property types.
We also find that institutional real estate investor sentiment introduces a nonfundamental
component into REIT pricing.

Can Linear Predictability Models Time Bull and Bear
Real Estate Markets? Out-of-Sample Evidence
from REIT Portfolios
Daniele Bianchi ·Massimo Guidolin
Published online: 6 April 2013

Abstract

A recent literature has shown that REIT returns contain strong evidence of
bull and bear dynamic regimes that may be best captured using nonlinear econometric
models of the Markov switching type. In fact, REIT returns would display regime
shifts that are more abrupt and persistent than in the case of other asset classes. In
this paper we ask whether and how simple linear predictability models of the vector
autoregressive (VAR) type may be extended to capture the bull and bear patterns
typical of many asset classes, including REITs. We find that nonlinearities are so
deep that it is impossibile for a large family of VAR models to either produce similar
portfolio weights or to yield realized, ex-post out-of-sample long-horizon portfolio
performances that may compete with those typical of bull and bear models. A typical
investor with intermediate risk aversion and a 5-year horizon ought to be ready to
pay an annual fee of up to 5.7 % to have access to forecasts of REIT returns that

International Direct Real Estate Risk Premiums
in a Multi-Factor Estimation Model
David Kim Hin Ho & Kwame Addae-Dapaah &
John L. Glascock
Published online: 3 July 2014

Abstract

We estimate international risk premiums for North and South Asia and US
direct real estate by using a pooled-panel multi-factor least squares model. Data for the
paper are from JLL REIS-Asia and the Russell-NCREIF Property Indexes. Our results,
based on the Geltner and Miller (2007) 1st and 4th order autoregressive de-smoothing
models, affirm the existence of appraisal smoothing in the direct real estate market
returns. Secondly, our findings affirm that the true historical volatility of autoregressive
lagged de-smoothed returns is a reasonable estimate of international direct real estate
risk premiums. Thirdly, we find that changes in macroeconomic and real estate
variables explain the office and retail returns more than the residential returns. There
is also a high vacancy rate risk premium that we attribute to country-specific, institutional
environmental factors. Furthermore, the South Asia direct real estate risk premium
is found to be higher than that for North Asia. Moreover the risk premiums for
North and South Asia are higher than that for the US. Finally, our results show that
appraisal smoothed returns significantly underestimate the international direct real
estate risk premiums for the sampled Asia markets and the US.

Related Party Transactions and Firm Value: Evidence
from Property Markets in Hong Kong, Malaysia
and Singapore
David H. Downs1 & Joseph T. L. Ooi2 &
Woei-Chyuan Wong3 & S. E. Ong2

Abstract

This paper offers new evidence as to how RPTs can be value enhancing for
minority shareholders. In doing so, we address an ongoing theoretical tension in the
related party transaction (RPT) literature by focusing on real estate investment trusts
(REITs) in Asia. The empirical evidence is mixed in the corporate finance literature on
whether RPTs create or destroy firm value. On average, REITs in our sample engaged
in RPTs amounting to 5.4 % of total assets, annually, between 2003 and 2010. This is
not a trivial amount and is nearly double the 2.8 % RPT rate for U.S. industrial firms.
We identify three main channels for REIT RPTs: real estate asset acquisitions from
related parties (57.4 %), income earned from related parties (22.2 %) and management
fees paid to related parties (14.8 %). The identification strategy we employ relies on
two distinct methodologies when examining RPTs and firm value: a multivariate
regression approach and, secondly, an exogenous wealth effects test for RPT announcements. Overall, the results suggest that REIT managers and sponsors do not
expropriate wealth from their minority shareholders through RPTs. We find evidence
that an ad hoc acquisitions pipeline from sponsor to REIT generally drives the value