1 Financial Management Association European Conference june 2005 Real Estate Investments: The Case of Italian Market Gabriele Sampagnaro Dipartimento di Studi Aziendali, University of Naples arthenope.
2 Real Estate Investments: the case of Italian market Topic: analysis of the role of Italian real estate in a mixed-portfolio with the MVO framework. Some initial questions: Which aspect of the role? Why MVO? Which the limits? Which data use? rivate or public market? private ublic Market, characteristics: Italian closed property funds Officially started in with the institution of specialized closed fund (fondi comuni di investimento immobiliari, Law 86/994) Illiquidity of the market and the limited number of listed funds Lack of a benchmark Real estate companies ABS
3 Global Real Estate Transparency Index 2004 Rank Real Estate Transparency Tier -5 (2004) Real Estate Transparency Tier -5 (2004) Real Estate Transp. (200) Australia.9 Same 2 New Zealand.9 Same 3 US.24 Same 4 UK.24 Same 22 Italy Improved Highly Transparent (Tier ) Transparent (Tier 2) Semi-Transparent (Tier 3) Low Transparent (Tier 4) Opaque (Tier 5)
4 Benefit from inclusion of an asset class not correlated returns C σ Max A σ Max B σ Max Frontier A without RE Frontier B A σ Min B σ Min C σ Min with RE Frontier C σ Min with RE σ Max From A to B : sling effect risk From A to C: raising effect
5 A Measure of Benefit Change in Mean Risk Adjusted erformance of Frontier (MeRAF) MeRAF returns = N N i= * R i σ i C σ Max N =0 decile MeRAF A σ Max B σ Max Frontier A without RE Frontier B A σ Min B σ Min C σ Min Deciles ortfolio (A C) ort. Var. Max. (A C) with RE Frontier C with RE D D2 D3 D4 D5 D6 D7 D8 D9 D0 Deciles ortfolio (A B) risk
6 DATA ortfolio are mixed in 4 domestic asset classes ) Stock COMIT Globale Index 2) Long Term Government Bond Buono Tesoro oliennale,bt 0 Y 3) Risk free rate 6-m; Buono Ordinari del Tesoro, BOT 6-m All Time series are monthly based. Time eriod: Jun 997-Jun ) Real Estate Scenari Immobiliari General Index Not Residential Index sectors Residential Commercial Inustrial Office
7 Real Estate DATA The SI indexes are based on a sample of 2000 properties, under the hypothesis they are representative of domestic market They are domestic indexes: the properties located in 03 town. The General and Not Residential Index consider the weight of each sector in Italian market They started the st of June 997 They are calculated following a mix approach (transaction/appraisal). In details, they re based on three variables: ) change in rental values; 2) Change of returns; 3) Change of volumes.
8 Real Estate DATA 280 Figure Cumulated returns may-96 sept-97 feb-99 jun-00 nov-0 mar-03 aug-04 Monthly Returns Residential Office Commercial Industrial SI General Not Residenial 5,00% 4,00% 3,00% 2,00%,00% 0,00% Figure 2 aug-96 jan-98 may-99 oct-00 feb-02 jun-03 Correlation Resid. Off. Comm Ind. Res. 0,50 0,48 0,52 Off. 0,58 0,42 Comm. 0,24 Ind. -,00% -2,00% -3,00% Residenziale Industriale Uffici ISI Generale Commerciale ISI Gen. non Residenz.
9 0,250 Table Asset Classes: perfomance and risk Stock LT Bond Risk free RE Mean 0,93% -0,47% 0,33%,% Standard Errors 0, , , , Median 0, , , ,08 Mode n.c. n.c. n.c 0,023 Standard Deviation 0,072 0,039 0,003 0,0063 Kurtosis 0, ,7392-0,532-0,936 Skewness 0,4065 0, ,5353-0,556 Min. -0,6875-0, ,000-0,0009 Max. 0,2352 0, , ,023 Figure 3 Data unsmoothed 0,200 0,50 Stock A Bond B Risk Free C RE (SI Gen) D RE Unsm. E 0,00 0,050 0,000 /03/997 24/07/998 06/2/999 9/04/200 0/09/2002 4/0/2004-0,050 A B C 0,090 0,06-0,56-0,00 D -0,002-0,044-0,005-0,50 E -0,29 0,066-0,080 0,767-0,200 Stock LT Gov. Bond Risk Free Real Estate
10 6 Empirical Results: RE General Index Annualized Return (%) unsmoothed 00% Stock 00% RE (SI Gen) 00% Bond 00% Risk Free Risk (%) Frontier withour RE Frontier with RE Frontier with RE (unsmoothed returns) 00% 0% 0% 00% 0% Risk 0% Risk % 0% 0% Risk Risk Free Rate LT Gov. Bond Stock RE Smothed RE Unsmothed
11 Empirical Results: RE not Residential Index 9 8 Annualized Return (%) % Stock 00% ISI non Res. 00% Bond 00% Risk Free Risk (%) Frontier without RE Frontier with RE Frontier with RE (unsm. ret.) 00% 0% 0% Risk % 0% 0% 00% 0% Risk 0% Risk Risk Free Rate LT Gov. Bond Stock RE Smothed RE Unsmothed
12 Returns (%) 7 6 Bayes&Stein rocedure 00% Stock 5 00% Re not Res. 00% Bond 4 00% Risk Free Risk (%) Frontier without RE Frontier with RE (Not Res.) E( ri ) = rg + wi ( ri rg ) w B&S Approach: i 2 ( k 3) σ i = max 0, 2 ( ri rg ) 00% 0% 0% Risk Risk Free Rate LT Gov. Bond Stock RE Smothed
13 0 Efficient Frontier contrained 9 Return (%) % Stock 00% RE not Res. 00% Bond 00% Risk Free Risk (%) CONSTRAINTS 0% Liquidity 5% bond equity 0% Real Estate 00% Risk Free Rate LT Gov. Bond Stock RE Smothed 0% 0% risk
14 Benefit of Diversification: MeRAF Efficient Frontier *Withour Real Estate With Re (SI Gen.) With RE (SI Gen Unsm.) With SI Non Resid. Index With SI Not Resid. Unsm. Index B&S Approach Constrained ortfolios MeRAF,5846 7,9670 3,7523,9076,7858,5577 0,60 Change - 9,0% 49,3% 20,4% 2,7% 4,2%,7%
15 Final remarks Use of more asset classes, (and not only domestic)..but the results do not change roblems with Italian real estate data. ublic markets.. Transaction costs and indivisibility of real estate investment
Managing secific risk in roerty ortfolios Andrew Baum, PhD University of Reading, UK Peter Struemell OPC, London, UK Contact author: Andrew Baum Deartment of Real Estate and Planning University of Reading
PRACTICE NOTE When rates rise, do stocks fall? The performance of equities and other return-seeking assets in rising and falling interest rate scenarios, January 1970 through September 2013 William Madden,
NUMBER 99 JULY 21 ECONOMIC ACTIVITY AND EMPLOYMENT FOREIGN TRADE AND COMPETITIVENESS INFLATION CREDIT THE PUBLIC FINANCES MACROECONOMIC PROJECTIONS 1 7 8 11 12 Directorate general for economics, statistics
BELEX15 Methodology Ver 2.3 Belgrade Stock Exchange, Avgust 2012 Page 1 Table of Contents 1. GENERAL INFORMATION... 3 Disclaimer... 3 2. INDEX NAME... 3 3. INDEX DEFINITION... 4 4. INDEX PURPOSE... 4 5.
Introduction of P/C Insurance Market in China Context Economic Environment in China P/C Insurance Market in China Development Status Market Potential P/C Insurance Regulation in China Overview Solvency
WHITE PAPER Emerging market equities does faster growth translate into higher returns? For professional investors - JUNE 2013 2 - Emerging market equities does faster growth translate into higher returns?
Income Diversification and Bank Performance: Evidence From Turkish Banking Sector Ali Osman GÜRBÜZ * Serhat YANIK ** Yusuf AYTÜRK *** Abstract In this study, relationship between non-interest income generating
UCITS Where we are now January 2015 c Section or Brochure name Foreword The Undertakings for Collective Investments in Transferrable Securities (UCITS) product has been a European success story since its
OECD Journal: Financial Market Trends Volume 2014/1 OECD 2014 Financing infrastructure International trends by Raffaele Della Croce and Stefano Gatti* The infrastructure financing market has gone through
RESEARCH ARTICLE aestimatio, the ieb international journal of finance, 2011. 3: 2-37 2011 aestimatio, the ieb international journal of finance are Portfolio holdings affected by Parameter Uncertainty and
Effect on Net Worth of 15- and 30-Year Mortgage Term John R. Aulerich 1, The choice between a 15-year and 30-year fixed-rate mortgage term is evaluated considering the borrower s income tax rate, ability
Is There Market Discipline in the European Insurance Industry? An Analysis of the German Insurance Market Martin Eling und Joan T. Schmit Preprint Series: 2009-08 Fakultät für Mathematik und Wirtschaftswissenschaften
Working paper research n 79 February 2006 Is there a difference between solicited and unsolicited bank ratings and if so, why? Patrick Van Roy Editorial Director Jan Smets, Member of the Board of Directors
PART 1: Introduction The best of both worlds A look at the complementary nature of active and passive investing Although the active versus passive investing debate may continue in the media, 2013 proved
Italian Equity Markets Liquidity, transparency, efficiency Borsa Italiana s Equity Markets MTA is the leading Italian Equity Market dedicated to mid and large size companies which meet the highest international
BOĞAZİÇİ ÜNİVERSİTESİ ISS/EC 2004 03 Estimating the Term Structure of Government Securities in Turkey C.Emre Alper Aras Akdemir Kazim Kazimov ARAŞTIRMA RAPORU RESEARCH PAPERS Boğaziçi University Department
WHY HAS THE UK CORPORATION TAX RAISED SO MUCH REVENUE? Michael P. Devereux Rachel Griffith Alexander Klemm THE INSTITUTE FOR FISCAL STUDIES WP04/04 WHY HAS THE UK CORPORATION TAX RAISED SO MUCH REVENUE?
Contents 1. Introduction... 3 2. Industry Analysis... 5 A. Premiums and Distribution of Insurance Types... 5 B. Life Insurance Assets Portfolio... 7 (1) General... 7 (2) Participating Life Insurance Programs
Principles and Practices Of Financial Management Wesleyan Assurance Society (Open Fund) Effective from 1 August 2008 Wesleyan Assurance Society Head Office: Colmore Circus, Birmingham B4 6AR Telephone:
Zsuzsanna Tajti: The methodological opportunities of quantifying the retail mortgage loan s LGD in Hungary - 1 - Institute of Finance and Accounting Department of Investments and Corporate Finance Tutor:
2014 Financialfacts London Life participating life insurance Accountability Strength Performance This guide provides key financial facts about the management, strength and performance of the London Life
What Would Yale Do If It Were Taxable? Patrick Geddes Lisa Goldberg Stephen Bianchi Aperio Group, LLC Three Harbor Drive, Suite 315 Sausalito, CA 94965 415.339.4300 www.aperiogroup.com Copyright 2014 Aperio
Volume 61 Number 6 2005, CFA Institute PERSPECTIVES Hedge Funds: Risk and Return Burton G. Malkiel and Atanu Saha Since the early 1990s, hedge funds have become an increasingly popular asset class. The
INTERNATIONAL LISTED REAL ESTATE INVESTMENT OPPORTUNITIES ABROAD COMPLIMENT A U.S. PROPERTY ALLOCATION JULY 2015 Exposure to Institutional Quality Commercial Real Estate Listed real estate offers investors
Determinants of Life Insurance Consumption across Countries Thorsten Beck and Ian Webb* World Bank and International Insurance Foundation The importance of life insurance companies as part of the financial
STAMP DUTY ON SHARE TRANSACTIONS: IS THERE A CASE FOR CHANGE? Mike Hawkins Julian McCrae THE INSTITUTE FOR FISCAL STUDIES Commentary 89 Stamp duty on share transactions: is there a case for change? Mike