Abstract

http://ssrn.com/abstract=1470249
 
 

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Pricing of Commercial Real Estate Securities during the 2007-2009 Financial Crisis


Joost Driessen


Tilburg University - Department of Finance; CentER Tilburg University

Otto Van Hemert


New York University (NYU) - Department of Finance

February 11, 2011


Abstract:     
We study the relative and absolute pricing of CMBX contracts (commercial real estate derivatives) during the recent financial crisis. Using a structural CMBX pricing model we find little systematic mispricing relative to REIT equity and options. We do find short-term deviations from this relative pricing relationship that are statistically and economically significant. In particular, the CMBX market temporarily overreacts to news announcements. We provide evidence that this temporary mispricing is caused by price pressure due to hedging activities. Finally, an absolute pricing analysis provides no substantial evidence that CMBX contracts traded at fire sale levels during the crisis.

Number of Pages in PDF File: 77

Keywords: Mortgage, CMBS, CMBX, REIT, Market Efficiency, Financial Crisis, Commercial Real Estate

JEL Classification: G12, G13, G14, G21

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Date posted: September 8, 2009 ; Last revised: July 29, 2011

Suggested Citation

Driessen, Joost and Van Hemert, Otto, Pricing of Commercial Real Estate Securities during the 2007-2009 Financial Crisis (February 11, 2011). Available at SSRN: http://ssrn.com/abstract=1470249 or http://dx.doi.org/10.2139/ssrn.1470249

Contact Information

Joost Driessen
Tilburg University - Department of Finance ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
CentER Tilburg University ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Otto Van Hemert (Contact Author)
New York University (NYU) - Department of Finance ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
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