Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/319155 
Year of Publication: 
2022
Citation: 
[Journal:] The Journal of Real Estate Finance and Economics [ISSN:] 1573-045X [Volume:] 69 [Issue:] 4 [Publisher:] Springer US [Place:] New York [Year:] 2022 [Pages:] 682-718
Publisher: 
Springer US, New York
Abstract: 
Abstract This paper studies the pricing of the risk associated with the location of the assets. The local real estate market risk is measured by ‘local beta’, which combines the systematic risk of local property markets and the property allocation strategy of real estate firms. The empirical results confirm a higher equity return for a firm with higher exposure to the most volatile property markets, particularly for REITs which are more geographically concentrated. For REITs with highly diversified assets, local real estate risks are not reflected in REIT returns. For those REITs with most concentrated assets, a one standard deviation increase in the local beta will lead to a 4.7% increase in the annual return. Investors can use REITs’ local real estate risk as an information tool to construct a long-short investment portfolio of real estate firms and can achieve a significant non-market performance of 4.9% per annum.
Subjects: 
Geographic asset location
Real estate returns
Local real estate risk
Diversification
Persistent Identifier of the first edition: 
Additional Information: 
G12;R3
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version
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