Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE credits
This study aims to analyze the beta and risk behavior of the Swedish listed real estate stocks.
Such a study will provide a clearer picture for investors and researchers about the changing
nature of that behavior over time.
The research method is based on descriptive statistics and CAPM beta regression analysis of
the monthly returns. Correlation analysis is employed to identify diversification benefits
within the sector stocks. In order to understand the behavior of beta/riskiness over time, the
stationary and time-varying beta estimations are conducted using CAPM market excess-return
model and rolling windows technique.
In this investigation, the time period from 2003 to 2012 is analyzed. The results reveal that a)
the betas of real estate stocks are asymmetric over time such that their values are higher
during market upturns than in market downturns, b) the betas for the various types of real
estate stocks are different, and c) there are low correlation coefficients among returns of real
estate stocks, and within the various property type stock groups.
While the real estate stock index as a whole is highly correlated to the market and has
relatively stable betas over time, there are diversification benefits among Swedish real estate
stocks. Hence, understanding the changing behaviors of beta over time of the various property
type stocks can help investors optimize their market timing and cost of capital expectations
according to the investment horizon.
It is important to notice that a lot of capital for real estate equity investments in Sweden is
allocated through non-traded private equity real estate funds. Therefore, transforming these
private funds into real estate traded funds might add the data depth and the market efficiency
necessary for better research validity and investment optimization. There are currently very
few traded real estate securities in the Swedish market.
Beta, Asymmetric beta, Time varying beta, Risk, Real Estate, Stocks, Equity, Sweden