The Usefulness of Economic Value-Added in the Australian Context
19 Pages Posted: 14 Aug 2012
Date Written: May 12, 1999
This paper employs a Generalized Autoregressive Conditional Heteroskedasticity in Mean (GARCH-M) model to consider the effect of macroeconomic factors on Australian property returns over the period 1985 to 2002. Three direct (office, retail and industrial property) and two indirect (listed property trust and property stock) returns are included in the analysis, along with market returns, short, medium and long-term interest rates, expected and unexpected inflation, construction activity and industrial employment and production. In general, the macroeconomic factors examined are found to be significant risk factors in Australian commercial property returns. However, the results also indicate that forecast accuracy in these models is higher for direct office, listed property trust and property stock returns and that the persistence of volatility shocks varies across the different markets, with volatility half lives of between five and seven months for direct retail and industrial property, two and three months for direct office property and less than two months with both forms of indirect property investment.
Keywords: property returns, listed property trust, property stocks, market risk, interest rate risk, industrial production and construction activity, generalised autoregressive conditional heteroskedasticity in mean (GARCH-M) models
JEL Classification: M410
Suggested Citation: Suggested Citation