Distance to Headquarter and Real Estate Equity Performance

Accepted to the Journal of Real Estate Finance and Economics.

37 Pages Posted:

See all articles by Stanimira Milcheva

Stanimira Milcheva

University College London

Yildiray Yildirim

Zicklin School of Business, Baruch College - The City University of New York

Bing Zhu

University of Reading - Henley Business School

Date Written: May 4, 2020

Abstract

We study the effect of geographic portfolio diversification of real estate firms on their investment performance before and after the global financial crisis (GFC). In addition to previously used dispersion metrics, we also account for the distance of the properties to the corporate headquarters. We document a notable shift in the non-market performance of real estate companies after the crisis. Pre-GFC, we do not find a difference in non-market performance across equities based on geographic diversification. Post-GFC, equities with high geographic dispersion significantly outperform the market, while firms with concentrated property holdings do not deliver a significant alpha. Increased real estate equity market sophistication and strong institutional presence can explain why this effect is only observed for dispersed small firms, those invested outside gateway metro areas, or companies with low institutional ownership.

Keywords: Distance to headquarter, real estate returns.

JEL Classification: G12, R3.

Suggested Citation

Milcheva, Stanimira and Yildirim, Yildiray and Zhu, Bing, Distance to Headquarter and Real Estate Equity Performance (May 4, 2020). Accepted to the Journal of Real Estate Finance and Economics.. Available at SSRN: https://ssrn.com/abstract=

Stanimira Milcheva (Contact Author)

University College London ( email )

1-19 Torrington Place
Department of Construction and Project Management
London, London WC1E 7HB
United Kingdom

Yildiray Yildirim

Zicklin School of Business, Baruch College - The City University of New York ( email )

55 Lexington Ave., Box B13-260
New York, NY 10010
United States

Bing Zhu

University of Reading - Henley Business School ( email )

Greenlands
Henley, RG9 3AU
United Kingdom

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