Real estate asset pricing – evidence from Australian and US Real Estate Investment Trusts (REITs)

Ye, Bingyang

Real estate asset pricing – evidence from Australian and US Real Estate Investment Trusts (REITs)

Ye, Bingyang

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Publication Type:: Thesis
Issue Date:: 2024

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Field	Value	Language
dc.contributor.author	Ye, Bingyang
dc.date.accessioned	2025-03-25T03:27:34Z
dc.date.available	2025-03-25T03:27:34Z
dc.date.issued	2024
dc.identifier.uri	http://hdl.handle.net/10453/186199
dc.description	University of Technology Sydney. Faculty of Design, Architecture and Building.	en_US.UTF-8
dc.description.abstract	This thesis addresses gaps in the literature on Australian Real Estate Investment Trusts (REITs), particularly regarding returns, volatility, and market efficiency. Current research is limited, especially in understanding the relationship between REITs and the stock market and the variability of returns over time. By filling these gaps, the study provides valuable insights for investors in the Australian REIT market. The research focuses on three aspects of REIT beta, which measures the sensitivity of REIT returns to stock market movements: the variation in beta across different sectors, beta behaviour during volatile market conditions, and the link between REITs' financial characteristics and beta. Understanding these factors helps investors evaluate associated risks and returns. The study uses three frameworks: Modern Portfolio Theory (MPT), Markov regime-switching models, and firm-level beta drivers. MPT analyses risk-return trade-offs; Markov models assess transitions between market conditions; and firm-level drivers examine financial ratios reflecting future return potential. Data from 2000 to 2021 are drawn from S&P Capital IQ Pro and WRDS CRSP for Australian and US REITs. The analysis categorises A-REITs into specialised and diversified groups, employing Herfindahl-Hirschman Indices (HHI) based on asset transactions. Regime-specific diversification benefits and firm-level ratios are analysed, alongside US liquidity measures such as turnover ratio and spread ratio. Sector analysis is performed for both markets. Findings suggest Australian REITs are generally less risky than the broader stock market, with specialised REITs having a 14% lower beta than diversified REITs. The relationship between REIT returns and stock market returns is asymmetrical across regimes, with greater sensitivity during crises. Diversification benefits are mainly observed during stable markets. Firm-level factors like size and yield positively affect US REIT performance, while illiquidity impacts it negatively. Australian REIT sector betas are lower than those in the US, with distinct sector performance differences.	en_US.UTF-8
dc.format	Thesis (PhD)
dc.language.iso	en_US	en_US.UTF-8
dc.relation	https://opus.lib.uts.edu.au/bitstream/10453/186199/1/thesis.pdf
dc.rights	info:eu-repo/semantics/openAccess
dc.rights	The author owns the copyright in this thesis including all reproduction and reuse rights for the work. The work may not be altered without the permission of the copyright owner. Attribution is essential when quoting or paraphrasing from this thesis.
dc.rights	© 2024 Bingyang Ye
dc.rights	au.edu.uts.lib/nph
dc.title	Real estate asset pricing – evidence from Australian and US Real Estate Investment Trusts (REITs)	en_US.UTF-8
dc.type	Thesis
utslib.copyright.status	open_access	*

Abstract:

This thesis addresses gaps in the literature on Australian Real Estate Investment Trusts (REITs), particularly regarding returns, volatility, and market efficiency. Current research is limited, especially in understanding the relationship between REITs and the stock market and the variability of returns over time. By filling these gaps, the study provides valuable insights for investors in the Australian REIT market. The research focuses on three aspects of REIT beta, which measures the sensitivity of REIT returns to stock market movements: the variation in beta across different sectors, beta behaviour during volatile market conditions, and the link between REITs' financial characteristics and beta. Understanding these factors helps investors evaluate associated risks and returns. The study uses three frameworks: Modern Portfolio Theory (MPT), Markov regime-switching models, and firm-level beta drivers. MPT analyses risk-return trade-offs; Markov models assess transitions between market conditions; and firm-level drivers examine financial ratios reflecting future return potential. Data from 2000 to 2021 are drawn from S&P Capital IQ Pro and WRDS CRSP for Australian and US REITs. The analysis categorises A-REITs into specialised and diversified groups, employing Herfindahl-Hirschman Indices (HHI) based on asset transactions. Regime-specific diversification benefits and firm-level ratios are analysed, alongside US liquidity measures such as turnover ratio and spread ratio. Sector analysis is performed for both markets. Findings suggest Australian REITs are generally less risky than the broader stock market, with specialised REITs having a 14% lower beta than diversified REITs. The relationship between REIT returns and stock market returns is asymmetrical across regimes, with greater sensitivity during crises. Diversification benefits are mainly observed during stable markets. Firm-level factors like size and yield positively affect US REIT performance, while illiquidity impacts it negatively. Australian REIT sector betas are lower than those in the US, with distinct sector performance differences.

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http://hdl.handle.net/10453/186199