Commercial Real Estate Loan Delinquency and Real Estate Market Performance

10 Pages Posted: 8 Jul 2013 Last revised: 20 Aug 2013

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

Date Written: July 7, 2013

Abstract

This study seeks to investigate the dynamic impact of commercial real estate loan delinquency (CRELD) rate on the real estate market performance proxied by REIT returns. The results from the analysis of quarterly data from 1991 Q1 to 2011 Q4 show that the value-weighted REIT returns significantly drop immediately following CRELD rate shock. CRELD rate Granger-causes the decline in REIT returns. The reverse causation from REIT returns to CRELD rate is not evident. The variance decomposition results show that CRELD rate forecasts about 14% of REIT returns from the two-quarter to eight-quarter horizons.

Keywords: real estate loan delinquency, real estate market performance, REITs

JEL Classification: G14, G20, G21, L85

Suggested Citation

Sum, Vichet, Commercial Real Estate Loan Delinquency and Real Estate Market Performance (July 7, 2013). Available at SSRN: https://ssrn.com/abstract=2290804 or http://dx.doi.org/10.2139/ssrn.2290804

Vichet Sum (Contact Author)

University of Maryland Eastern Shore - School of Business and Technology ( email )

2105 Kiah Hall
Princess Anne, MD 21853
United States
410-651-6531 (Phone)
410-651-6529 (Fax)

HOME PAGE: http://www.umes.edu/bma/Sum.html

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