The Anatomy of Public and Private Real Estate Return Premia

  Picture of return's decomposition Bertram I. Steininger

In the real estate market, risks can be market-wide, stock market specific and real estate market specific, but which kind of risk drives the returns of listed real estate to which extent?

In contrast to the existing literature and based on a structural asset pricing model calibrated to the empirical data in the US, we show that at least two thirds of the risk premium of the listed real estate are driven by the same factors as direct real estate. Our results shed much-needed light on the risk-characteristics of listed real estate returns and are of high interest for academics, regulators, and portfolio managers.

Working Paper