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Real Estate Ownership and Stock Returns: An Empirical Perspective

Author/s: Liow Kim Hiang

Date Published: 1/01/2002

Published in: Volume 8 - 2002 Issue 3 (pages 226 - 235)

Abstract

Many publicly traded non-property corporations invest significantly in real estate. However, some of these companies have also claimed that there is significant “hidden” value in real estate that is not reflected in the companies’ share prices. One main reason is that properties that were purchased years ago are carried on balance sheets for a fraction of its market value. This paper uses a “three-index” real estate pricing model to assess whether real estate is a factor in corporate valuation of “property-intensive ” non-real estate companies. The empirical results demonstrate a significant association with stocks in the “property” sector for the property intensive firms. Hence corporate management should consider the real estate ownership factor in their overall corporate strategy.

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Keywords

Common Factors - Corporate Real Estate - Singapore - Stock Return - Three-Index Model

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