Global Financial Integration and Real Estate Security Returns
42 Pages Posted: 1 Jun 2006
Date Written: May 2007
Have globalization and increasing economic and financial integration affected the rates of return of publicly traded real estate companies around the world? Using a set of multi-factor models for annual data for 946 firms from 16 countries over the sample period, 1995-2002, we estimate the impact of a country's economic openness on returns of publicly traded real estate firms, controlling for the effects of global capital markets, domestic macro-economic, and firm-specific variables. We find that a country's real estate security excess (risk-adjusted) returns are negatively related to its openness. The results are robust across different multi-factor model specifications, and suggest that real property market efficiency may have been enhanced for non-tradable goods such as real estate in globalizing economies.
Keywords: globalization, economic openness, international financial market, real estate returns, international financial integration
JEL Classification: F36, F21, G15
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