What Factors Determine International Real Estate Security Returns?
Author InfoFoort HAMELINK (Lombard Odier & Cie, Vrije Universiteit and FAME) Martin HOESLI (HEC-University of Geneva, FAME and University of Aberdeen) Abstract We use constrained cross-section regressions to disentangle the effects of various factors on international real estate security returns. Besides a common factor, pure country, property type, size, and value/growth factors are considered. The value/growth measure that is used in this paper provides for each security the relative importance of the value and growth components, rather than a binary classification. The value/growth factor is found to be volatile and to have a substantial effect on returns over the analyzed period February 1990-April 2003. Country factors are the dominant factors, and size is shown to have a negative impact on returns. Statistical factors derived by means of cluster analysis explain about one third of specific returns on international real estate securities. The implication for portfolio managers is
