Value premium in international REITs

van der Werf, Ytzen M; Huibers, Fred

Abstract

We find evidence of a value premium of 10.3 per cent per annum for international developed REITs over the period Q2-1993-Q2-2013. REITs with a high book value of equity compared to their market value of equity (in case of REITs book value of equity is approximately equal to Net Asset Value (NAV)) perform significantly better than REITs with a low book to market multiple. Even after controlling for risk factors in the single factor CAPM model or the Fama French three factor model, the value strategy provides significant alpha. This suggests value premium is the result of naive extrapolation of past performance by real estate investors rather than a commensurate reward for risk. For real estate practitioners, the results provide the basis for the formulation and implementation of a viable indirect global investment strategy.

• Journal Article Type: Article
• Acceptance Date: Feb 1, 2014
• Publication Date: Mar 4, 2014
• Deposit Date: Mar 30, 2017
• Journal: ASRE research paper series
• Print ISSN: 1878-4607
• Peer Reviewed: Not Peer Reviewed
• Volume: 2014
• Issue: 02
• Keywords: investment strategy, investment companies, returns, performance, portfoliomanagement; risk; real estate investment trusts; listed funds; intrinsic value
• Public URL: https://uwe-repository.worktribe.com/output/820486
• Publisher URL: http://files.vastgoedbibliotheek.nl/Server/getfile.aspx?file=docs/publicaties/ASRE_paper_14_02_Value.pdf
• Related Public URLs: http://files.vastgoedbibliotheek.nl/Server/getfile.aspx?file=docs/publicaties/ASRE_paper_14_02_Value.pdf
• Contract Date: Mar 30, 2017