Real Estate Exposure and Asset Intensity

16 Pages Posted: 22 Oct 1999

See all articles by Seow Eng Ong

Seow Eng Ong

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

Yong Yi Yong

National University of Singapore (NUS)

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 1999

Abstract

Real estate accounts for a significant proportion of the corporate assets of publicly listed companies. The real estate exposure of publicly traded companies in land scare economies such as Hong Kong and Singapore is particularly high. This study explores the real estate exposure of listed companies in Singapore where non-real estate companies are classified by their real estate asset intensity. A six-factor Arbitrage Pricing Theory (APT) model, capturing changes in real estate prices, industrial production, expected inflation, unanticipated inflation, risk premium and term structure, shows that real estate exposure is priced. In addition, the real estate risk premium is found to vary across companies with different real estate asset intensity. A close linkage is also established between real estate exposure and various industries. Other than the real estate-intensive industries such as real estate, hotel and construction, conglomerates and financial companies also have a high exposure to real estate. Interestingly, our analysis shows that real estate exposure, which is computationally tedious to determine, can be proxied by real estate asset intensity, a simple accounting measure. The implications for portfolio management in a land-scare market are examined.

JEL Classification: R33

Suggested Citation

Ong, Seow Eng and Yong, Yong Yi, Real Estate Exposure and Asset Intensity (June 1, 1999). Available at SSRN: https://ssrn.com/abstract=174808 or http://dx.doi.org/10.2139/ssrn.174808

Seow Eng Ong (Contact Author)

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

4 Architecture Drive
Singapore 117566
Singapore
01-65-6516-3552 (Phone)
01-65-6774-8684 (Fax)

Yong Yi Yong

National University of Singapore (NUS)

School of Building and Real Estate AR1 Level 3, 4 Architecture Drive
Singapore 117591
REPUBLIC OF SINGAPORE

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