Nowhere to Go but Up: A Study of Listed Real Estate Sensitivity to Changes in Interest Rates

29 Pages Posted: 14 Mar 2017

See all articles by Alexey Akimov

Alexey Akimov

Lancaster University Management School

Simon Stevenson

University of Reading - Henley Business School

Date Written: February 2017

Abstract

This study re-examines the sensitivity of global listed real estate markets to changes in market and Central Bank interest rates with respect to both their returns and volatility. Specifically the paper considers the recent period of relaxing monetary policies in the countries with the largest global listed real estate markets. The results confirm importance of the market interest rates in explaining daily changes in listed real estate prices. The significant results are dominated by the interest rates with longer maturity which reflects the common notion of real estate sector’s exposure to the long-term financing. The paper covers the recent Global Financial Crisis and finds that the significant findings are not crisis-driven. The significance of the interest rate factors weakens during the most recent period of 2007-2015 when the countries in our sample implement expansionary monetary policy. Finally, the results of this paper are robust to the alternative specifications with additional control variables.

Keywords: Listed Real Estate, REITs, International Real Estate, Interest Rate Risk

JEL Classification: G12, G15, E43

Suggested Citation

Akimov, Alexey and Stevenson, Simon, Nowhere to Go but Up: A Study of Listed Real Estate Sensitivity to Changes in Interest Rates (February 2017). Available at SSRN: https://ssrn.com/abstract=2931732 or http://dx.doi.org/10.2139/ssrn.2931732

Alexey Akimov (Contact Author)

Lancaster University Management School ( email )

Department of Accounting & Finance
Bailrigg
Lancaster, Lancashire LA1 4YX
United Kingdom
+44 1524 593635 (Phone)

HOME PAGE: http://www.lancaster.ac.uk/lums/people/all/alexey-akimov/

Simon Stevenson

University of Reading - Henley Business School ( email )

Greenlands
Reading, Henley on Thames RG6 6AH
United Kingdom

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