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Listed property trusts and downside systematic risk sensitivity

Lee, Chyi Lin, Robinson, Jon and Reed, Richard 2008, Listed property trusts and downside systematic risk sensitivity, Journal of property investment and finance, vol. 26, no. 4, pp. 304-328.

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Title Listed property trusts and downside systematic risk sensitivity
Author(s) Lee, Chyi Lin
Robinson, Jon
Reed, Richard
Journal name Journal of property investment and finance
Volume number 26
Issue number 4
Start page 304
End page 328
Publisher Emerald Group Publishing
Place of publication Bingley, England
Publication date 2008
ISSN 1463-578X
1470-2002
Keyword(s) Australia
financial management
financial risk
property
real estate
Summary Purpose: This paper aims to identify and examine the determinants of downside systematic risk in Australian listed property trusts (LPTs).

Design/methodology/approach: Capital asset pricing model (CAPM) and lower partial moment-CAPM (LPM-CAPM) are employed to compute both systematic risk and downside systematic risk. The methodology of Patel and Olsen and Chaudhry et al. is adopted to examine the determinants of systematic risk and downside systematic risk.

Findings: The results confirm that systematic risk and downside systematic risk can be individually identified. There is little evidence to support the existence of linkages between systematic risk in Australian LPTs and financial/management structure determinants. On the other hand, downside systematic risk is directly related to the leverage/management structure of a LPT. The results are also robust after controlling for the LPTs' investment characteristics and varying target rates of return.

Practical implications: Investors and real estate analysts should conscious with the higher returns from high leverage and internally managed LPTs. Although there is no evidence that these higher returns are related to higher systematic risk, there could be the compensation for higher downside systematic risk.

Originality/value: This study provides invaluable insights into the management of real estate risk in Australian LPTs with implications for REITs in other countries. Unlike previous studies of systematic risk in REITs or LPTs, this is the first study to assess downside systematic risk and explore the determinants of downside systematic risk in LPTs.
Notes Reproduced with the kind permission of the copyright owner.
Language eng
Field of Research 120503 Housing Markets, Development, Management
HERDC Research category C1.1 Refereed article in a scholarly journal
Copyright notice ©2008, Emerald Group Publishing Limited
Persistent URL http://hdl.handle.net/10536/DRO/DU:30021983

Document type: Journal Article
Collections: School of Architecture and Built Environment
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