Real Estate Investments, Product Market Competition and Stock Returns

43 Pages Posted: 5 Jun 2018

See all articles by Moussa Diop

Moussa Diop

University of Southern California

Multiple version iconThere are 2 versions of this paper

Date Written: Summer 2018

Abstract

By limiting operating flexibility, real estate investments are found to increase firm risk, thus expected returns. This study introduces product market competition as a critical determinant of the relation between real estate investments and stock returns. As part of capacity strategies, these investments are generally associated with increased market power and lower cash flow volatility in oligopolistic industries. I present a simple model of oligopolistic competition showing a negative relation between real estate holdings and firm beta, and empirically confirm this prediction. Controlling for product market competition enhances identification of the endogenous relation between real estate investments and stock returns.

Suggested Citation

Diop, Moussa, Real Estate Investments, Product Market Competition and Stock Returns (Summer 2018). Real Estate Economics, Vol. 46, Issue 2, pp. 291-333, 2018, Available at SSRN: https://ssrn.com/abstract=3189531 or http://dx.doi.org/10.1111/1540-6229.12201

Moussa Diop (Contact Author)

University of Southern California ( email )

Sol Price School of Public Policy
RGL 315
Los Angeles, CA 90089
United States
(213)821-0467 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
173
PlumX Metrics