Downside Risk to Real Estate Essay Example | Topics and Well Written Essays - 5250 words

Downside Risk to Real Estate - Essay ExampleThe analysis includes independent variables move from a database and includes variables to define results for the impact of macroeconomic factors. In addition, indexes for the broader markets are identified and included in the regressions to adjust for the impact of trends in the general market. enthronisation in Listed Property Trusts (LPTs) or Real Estate Investment Trusts (REITs) has traditionally considered risk as an important factor. Numerous studies on risk have also show that REITs financial condition and management structure have implications for its risk. Most of these studies have utilised the cross-sectional deflexion of REIT financial conditions and REIT management structure in estimating the relationship between these variables and risk. A REITs risk is heartbeatd by the beta coefficient in the crownwork Asset Pricing Model (CAPM) in which it is measured in a variance framework.However, the appropriateness of using CAPM i n particular the use of beta as risk measure has been debated in recent years. In fact, several studies suggest downside self-opinionated risk (downside beta) is comparatively better than systematic risk for measuring market-related risk for an asset in line with the theoretical superiorities of downside risk. Downside risk was first introduced by Roy (1952) primarily based on the safety first rule. It appears as a more intuitively sympathetic and secure risk measure compared to variance for several reasons such as downside risk does not look at an assumption about the return distribution of an asset it is more consistent with the investors expected utility depart and combining information provided by variance and skewness into one measure (Nawrocki, 1999, Estrada, 2002).Hogan and Warren (1974) and Bawa and Linderberg (1977) also demonstrate that downside risk (lower partial moment) can be generalised into CAPM and they developed a Mean-lower Partial Moment Capital Asset Pricin g Model (MLPM-CAPM). The results from Price