Open Access. Powered by Scholars. Published by Universities.®
Finance and Financial Management Commons™
Open Access. Powered by Scholars. Published by Universities.®
- Discipline
- Keyword
-
- REITs (5)
- Real estate investment (4)
- Leverage (3)
- Capital structure (2)
- Financial crisis (2)
-
- Index membership (2)
- Real estate (2)
- Agency conflict (1)
- Asset management (1)
- Asset prices (1)
- Capital expenditures (1)
- Commercial real estate investment trusts (1)
- Corporate leverage (1)
- Default risk (1)
- Earnings growth (1)
- Earnings risk (1)
- Economic fundamentals (1)
- Europe (1)
- Financial flexibility (1)
- Financial stability (1)
- Firm value (1)
- Flood risk (1)
- GSES (1)
- Hotel REITs (1)
- Idiosyncratic risks (1)
- Inflation hedging (1)
- Investment (1)
- JEL E58 (1)
- JEL G21 (1)
- JEL G23 (1)
Articles 1 - 14 of 14
Full-Text Articles in Finance and Financial Management
The Consequences Of Reit Index Membership For Return Patterns, Andrey Pavlov, Eva Steiner, Susan Wachter
The Consequences Of Reit Index Membership For Return Patterns, Andrey Pavlov, Eva Steiner, Susan Wachter
Eva Steiner
The impact of stock market index membership on REIT stock returns is unclear. Returns may become more like those of other indexed stocks and less like those of their underlying properties. Taking advantage of the inclusion of REITs in major S&P indexes starting in 2001, we find that shared index membership significantly increases the correlation between REIT returns. However, index membership also enhances the link between REIT returns and the underlying real estate, consistent with improved pricing efficiency.
Where, When And How Do Sophisticated Investor Respond To Flood Risk?, Piet M. A. Eichholtz, Eva Steiner, Erkan Yönder
Where, When And How Do Sophisticated Investor Respond To Flood Risk?, Piet M. A. Eichholtz, Eva Steiner, Erkan Yönder
Eva Steiner
While the empirical evidence on the pricing of flood risk exposure in residential real estate held by uninformed households is mixed, this study shows that sophisticated investors in commercial real estate markets rationally respond to heightened flood risk by bidding down the prices of exposed assets. Using a detailed property-level database on commercial real estate transactions completed in New York, Boston, and Chicago before and after the shift in the salience of flood risk caused by Hurricane Sandy, we document that properties exposed to flood risk experience slower price appreciation after the storm than equivalent unexposed properties. We further show …
The Rate Of Return On Real Estate: Long-Run Micro-Level Evidence, David Chambers, Christian Spaenjers, Eva Steiner
The Rate Of Return On Real Estate: Long-Run Micro-Level Evidence, David Chambers, Christian Spaenjers, Eva Steiner
Eva Steiner
We provide evidence that direct real estate investments are less profitable and more risky in the long run than previously thought. We hand-collect property-level data on realized income, expenses, and transaction prices from the archives of four large institutional investors in the U.K.—historically important Oxbridge colleges—for the period 1901–1970. Gross income yields mostly fluctuate around 5%, but trend to lower (higher) levels for agricultural and residential (commercial) real estate near the end of our sample period. Operating costs mean that net yields are about one third lower than gross yields on average. Long-term real income growth rates are between -1.0% …
Financial Flexibility And Manager-Shareholder Confict: Evidence From Reits, Timothy Riddiough, Eva Steiner
Financial Flexibility And Manager-Shareholder Confict: Evidence From Reits, Timothy Riddiough, Eva Steiner
Eva Steiner
Using equity REIT data, we show empirically that the use of unsecured debt, which contains standardized covenants that place limits on total leverage and the use of secured debt, is associated with lower leverage outcomes. We then show that firm value is sensitive to leverage levels, where lower leverage is associated with higher firm value. In the presence of weak managerial governance, our results suggest that unsecured debt covenants function as a managerial commitment device that preserves the firm’s debt capacity to enhance financial flexibility.
Economic Fundamentals, Capital Expenditures And Asset Dispositions, Brent Ambrose, Eva Steiner
Economic Fundamentals, Capital Expenditures And Asset Dispositions, Brent Ambrose, Eva Steiner
Eva Steiner
Research on the disposition effect in real assets to date ignores the active management component of these investments. Active management notably includes decisions about follow-up investment in the form of capital expenditures, as well as dispositions. Using a real option framework, we develop testable hypotheses and provide empirical evidence for the relationships between economic fundamentals, capital expenditures, property values, and the subsequent likelihood of sale. Our results shed new light on the evidence for the disposition effect.
Fundamental Drivers Of Dependence In Reit Returns, Jamie Alcock, Eva Steiner
Fundamental Drivers Of Dependence In Reit Returns, Jamie Alcock, Eva Steiner
Eva Steiner
We analyse the empirical relationships between firm fundamentals and the dependence structure between individual REIT and stock market returns. In contrast to previous studies, we distinguish between the average systematic risk of REITs and their asymmetric risk in the sense of a disproportionate likelihood of joint negative return clusters between REITs and the stock market. We find that REITs with low systematic risk are typically small, with low short-term momentum, low turnover, high growth opportunities and strong long-term momentum. Holding systematic risk constant, the main driving forces of asymmetric risk are leverage and, to some extent, short-term momentum. Specifically, we …
The Tension Between Monetary Policy And Financial Stability: Evidence From Agency Mortgage Reits, W. Scott Frame, Eva Steiner
The Tension Between Monetary Policy And Financial Stability: Evidence From Agency Mortgage Reits, W. Scott Frame, Eva Steiner
Eva Steiner
The prolonged use of unconventional monetary policies since the financial crisis has resulted in concerns about the potential for such policy accommodation to undermine financial stability. Recent research identifying a “risk-taking channel” of monetary policy suggests that rapidly growing shadow banking organizations are of particular concern. In this paper, we study Agency mortgage REITs (Agency MREITs), which are specialized, tax-exempt financial institutions, whose rapid growth raised systemic risk concerns by the Financial Stability Oversight Council. After controlling for key variables that drive the Agency MREIT business (level, slope, and expected volatility of the term structure as well as the mortgage …
Reit Capital Structure: The Value Of Getting It Right, Eva Steiner
Reit Capital Structure: The Value Of Getting It Right, Eva Steiner
Eva Steiner
An analysis of the capital structure of commercial real estate investment trusts finds that the strongest REITs overall tend to employ lower leverage and longer debt maturity, maintain larger proportions of fixed-rate debt, rely less on secured debt, have a greater line of credit capacity but use it less, and hold smaller cash reserves. The REITs’ strength is measured by Tobin’s q, which expresses the ratio of the market value of assets relative to their book value. The study examines yearly data for the years 1993 through 2013 for 137 REITs based in the United States and the years 2001 …
Capital Expenditures, Asset Dispositions, And The Real Estate Cycle, Brent W. Ambrose, Eva Steiner
Capital Expenditures, Asset Dispositions, And The Real Estate Cycle, Brent W. Ambrose, Eva Steiner
Eva Steiner
Recent empirical research provides evidence on the asset disposition choices of individual and institutional real estate investors that is consistent with the `disposition effect'. We propose a value-add investment strategy as an alternative rational explanation for the observed patterns in disposition choices. The main value-add mechanism in real estate investment is capital expenditures. However, capital expenditure investment is a real option whose exercise depends on its moneyness, which is a function of the economic environment. Therefore, we study the links between economic conditions, building-level capital expenditures, and subsequent transactions throughout the real estate cycle. We present empirical evidence consistent with …
The Consequences Of Reit Index Membership For Return Patterns, Andrey Pavlov, Eva Steiner, Susan Wachter
The Consequences Of Reit Index Membership For Return Patterns, Andrey Pavlov, Eva Steiner, Susan Wachter
Eva Steiner
We study the impact of S&P index membership on REIT stock returns. Given the hybrid nature of REITs, their returns may become more like those of other indexed stocks and less like those of their underlying properties. The existing literature does not offer clear predictions on these potential outcomes. Taking advantage of the inclusion of REITs in major S&P indexes starting in 2001, we find that shared index membership significantly increases the correlation between REIT returns after controlling for the stock characteristics that determine index membership. We also document that index membership enhances the link between REIT stock returns and …
Leverage, Volatile Future Earnings Growth And Expected Stock Returns, Jamie Alcock, Eva Steiner, Kelvin Jui Keng Tan
Leverage, Volatile Future Earnings Growth And Expected Stock Returns, Jamie Alcock, Eva Steiner, Kelvin Jui Keng Tan
Eva Steiner
We provide theory and evidence to complement Choi's [RFS, 2013] important new insights on the returns to equity in `value' firms. We show that higher future earnings growth ameliorates the value-reducing effect of leverage and, because the market for earnings is incomplete, reduces the earnings-risk sensitivity of the default option. Ceteris paribus, a levered firm with low (high) earnings growth is more sensitive to the first (second) of these effects thus generating higher (lower) expected returns. We demonstrate this by modeling equity as an Asian-style call option on net earnings and find significant empirical support for our hypotheses.
Reit Capital Structure Choices: Preparation Matters, Andrey Pavlov, Eva Steiner, Susan Wachter
Reit Capital Structure Choices: Preparation Matters, Andrey Pavlov, Eva Steiner, Susan Wachter
Eva Steiner
Sun, Titman, and Twite (2015) find that capital structure risks, namely high leverage and a high share of short-term debt, reduced the cumulative total return of US REITs in the 2007-2009 financial crisis. We find that mitigating capital structure risks ahead of the crisis by reducing leverage and extending debt maturity in 2006, was associated with a significantly higher cumulative total return 2007-2009, after controlling for the levels of those variables at the start of the financial crisis. We further identify two systematic cross-sectional differences between those REITs that reduced capital structure risks prior to the financial crisis and those …
The Interrelationships Between Reit Capital Structure And Investment, Jamie Alcock, Eva Steiner
The Interrelationships Between Reit Capital Structure And Investment, Jamie Alcock, Eva Steiner
Eva Steiner
Unexpected Inflation, Capital Structure And Real Risk-Adjusted Firm Performance, Jamie Alcock, Eva Steiner
Unexpected Inflation, Capital Structure And Real Risk-Adjusted Firm Performance, Jamie Alcock, Eva Steiner
Eva Steiner