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Exploring Beta’s Changing Behavior ofSwedish Real Estate Stocks
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management.
2013 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

This study aims to analyze the beta and risk behavior of the Swedish listed real estate stocks.

Such a study will provide a clearer picture for investors and researchers about the changing

nature of that behavior over time.

The research method is based on descriptive statistics and CAPM beta regression analysis of

the monthly returns. Correlation analysis is employed to identify diversification benefits

within the sector stocks. In order to understand the behavior of beta/riskiness over time, the

stationary and time-varying beta estimations are conducted using CAPM market excess-return

model and rolling windows technique.

In this investigation, the time period from 2003 to 2012 is analyzed. The results reveal that a)

the betas of real estate stocks are asymmetric over time such that their values are higher

during market upturns than in market downturns, b) the betas for the various types of real

estate stocks are different, and c) there are low correlation coefficients among returns of real

estate stocks, and within the various property type stock groups.

While the real estate stock index as a whole is highly correlated to the market and has

relatively stable betas over time, there are diversification benefits among Swedish real estate

stocks. Hence, understanding the changing behaviors of beta over time of the various property

type stocks can help investors optimize their market timing and cost of capital expectations

according to the investment horizon.

It is important to notice that a lot of capital for real estate equity investments in Sweden is

allocated through non-traded private equity real estate funds. Therefore, transforming these

private funds into real estate traded funds might add the data depth and the market efficiency

necessary for better research validity and investment optimization. There are currently very

few traded real estate securities in the Swedish market.

Place, publisher, year, edition, pages
Keyword [en]
Beta, Asymmetric beta, Time varying beta, Risk, Real Estate, Stocks, Equity, Sweden
National Category
Engineering and Technology
URN: urn:nbn:se:kth:diva-131473OAI: diva2:656578
Educational program
Degree of Master - Real Estate Development and Financial Services
Available from: 2013-10-16 Created: 2013-10-16 Last updated: 2013-10-16Bibliographically approved

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Medhat Khalil(1602 kB)861 downloads
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