Net Asset Value Discounts for Asian-Pacific Real Estate Companies: Long-Run Relationships and Short-Term Dynamics

28 Pages Posted: 27 Sep 2005

See all articles by Kim Hiang Liow

Kim Hiang Liow

National University of Singapore (NUS) - Department of Real Estate

Ying Li

National University of Singapore (NUS)

Abstract

This study investigates the time series behavior of real estate company net asset value discount/premium (NAVDISC) in eight Asian-Pacific securitized real estate markets from 1995 to 2003. We postulate that if there is a stable NAVDISC for real estate companies in the long-run, then there should be a long-run cointegrating relation between their stock prices (Ps) and net asset values (NAVs). Employing panel data cointegration econometrics that comprises three approaches; panel unit root test, heterogeneous panel cointegration test and dynamic panel error-correction modeling (ECM), we find that long run NAVDISCs persist in individual Asian-Pacific securitized real estate markets and the regional market. All the NAVDISCs exhibit mean reversion and that the respective disequilibrium errors fluctuate around the mean values. Moreover, NAV is an important factor that statistically explains the price variations in real estate stock prices regardless of their speed of mean-reversion in the NAV discount/premium.

Keywords: Asia-Pacific securitized real estate markets, net asset value discount/premium, panel unit root, panel cointegration, dynamic panel error-correction modeling

Suggested Citation

Liow, Kim Hiang and Li, Ying, Net Asset Value Discounts for Asian-Pacific Real Estate Companies: Long-Run Relationships and Short-Term Dynamics. Journal of Real Estate Finance and Economics, Vol. 33, No. 4, 2006. Available at SSRN: https://ssrn.com/abstract=790304

Kim Hiang Liow (Contact Author)

National University of Singapore (NUS) - Department of Real Estate ( email )

4 Architecture Drive
Singapore 117566
Singapore
65-8743420 (Phone)
65-7748684 (Fax)

Ying Li

National University of Singapore (NUS) ( email )

Bukit Timah Road 469 G
Singapore, 117591
Singapore

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