Real Estate Risk in Equity Returns Empirical Evidence from U.S. Stoc
“The central task of financial economics is to figure out what are the real risks that drive asset prices and expected returns.” (John Cochrane in Asset Pricing, 2001). The ongoing debate in the financial economics literature between rational and irration
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GABLER EDITION WISSENSCHAFT EBS Forschung Schriftenreihe der European Business School (EBS) International University · Schloss Reichartshausen Herausgegeben von Univ.-Prof. Ansgar Richter, PhD
Band 72
Die European Business School (EBS) – gegründet im Jahr 1971 – ist Deutschlands älteste private Wissenschaftliche Hochschule für Betriebswirtschaftslehre im Universitätsrang. Dieser Vorreiterrolle fühlen sich ihre Professoren und Doktoranden in Forschung und Lehre verpflichtet. Mit der Schriftenreihe präsentiert die European Business School (EBS) ausgewählte Ergebnisse ihrer betriebs- und volkswirtschaftlichen Forschung.
Gaston Michel
Real Estate Risk in Equity Returns Empirical Evidence from U.S. Stock Markets With a foreword by Prof. Dr. Lutz Johanning
GABLER EDITION WISSENSCHAFT
Bibliographic information published by the Deutsche Nationalbibliothek The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available in the Internet at http://dnb.d-nb.de.
Dissertation European Business School, International University Schloss Reichartshausen, Oestrich-Winkel, 2009 D1540
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Foreword Asset pricing theory aims at linking an asset’s higher return to its higher risk exposure. However, the Capital Asset Pricing Model (CAPM) of Sharpe (1964) and Lintner (1965), the most widely taught model in business and economics classes, has been largely contested in the literature by researchers finding anomalous patterns in equity returns. Based on the failure to match the CAPM with empirical data, researchers have been in an ongoing dispute whether the anomalous behavior in equity returns is still reconcilable with market equilibrium and, therefore, with a risk-based explanation, or must be seen as consequences of investors’ irrational behavior and the agency costs of professional investment management. To support a rational pricing story, Fama and French (1992, 1993, 1996) develop a three-factor model that is highly successful in capturing the two well-known anomalies related to a stock’s market capitalization and valuation level, the size and book-to-market effects. They argue that their model must be seen in the
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