Global Risk Premiums on Direct Office Real Estate Returns

Autor: Ivo de Wit, Christopher J. Mayer
Rok vydání: 2021
Předmět:
Zdroj: The Journal of Portfolio Management. 47:91-106
ISSN: 2168-8656
0095-4918
DOI: 10.3905/jpm.2021.1.266
Popis: This article empirically examines the magnitude of risk premiums for direct real estate investments on a global basis. As this article analyzes ex-ante risk premiums over more than 25 years consistently across the world, it enhances current knowledge about the regional differences between risk premiums and helps long-term investors with their global portfolio allocation over time. On a global level, the authors find a risk premium of 4.1% for Gordon’s growth and 3.7% for two-stage growth model. The periodic growth model shows a slightly lower risk premium of 3.1%. As this study is analyzing a long time period, the article extends the literature by finding evidence for convergence between risk premiums across continents both over time and in cross-sectional variance. However, this is happening slowly, thereby making differences in risk premiums very important in making a global direct real estate investment allocation. TOPICS:Real estate, analysis of individual factors/risk premia, portfolio construction, performance measurement Key Findings ▪ The authors analyze ex-ante risk premiums over more than 25 years across the world and use three alternative valuation models to estimate ex-ante risk premiums. ▪ They find that the regional risk premiums are consistent with previous research on the determinants of risk premiums, but these studies were done over shorter time periods. ▪ The authors find evidence for convergence between risk premiums across continents both over time and in cross-sectional variance.
Databáze: OpenAIRE
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