Leverage and Returns: A Cross-Country Analysis of Public Real Estate Markets

  • Emanuela Giacomini
  • David C. Ling
  • Andy NaranjoEmail author


The theoretical literature suggests a positive relation between financial leverage and asset returns, but the empirical evidence on this effect is mixed. We examine leverage effects in public real estate markets across eight countries with active public real estate markets. Cross-country public real estate markets provide an interesting testing ground given the significant use of leverage in real estate markets, the variation in REIT capital structures within and across countries, and the cross-country differences in liquidity, ownership, economic, institutional, and capital market structures. After carefully isolating leverage effects in firm-level returns, we find that leverage has a significant effect on returns both unconditionally and conditionally using standard asset pricing models. In addition, greater use of leverage during the 2007–2008 REIT crisis period is associated with larger share price declines.


Asset returns Leverage REITs Cross-country real estate returns Financial constraints Crisis 

JEL Classification

G110 G120 G150 G320 G01 



We would like to thank Xudong An, Dennis Capozza, David Downs, Bob Edelstein, Piet Eichholz, Dan French, Julia Freybote, David Geltner, Fraser Hughs, Seow Ong, Michael Seiler, Tim Riddiough, and the EPRA research committee, as well as seminar participants at the MNM 2013 MIT symposium and Homer Hoyt Institute for helpful comments and suggestions. We also thank EPRA for providing both data and financial support.

Supplementary material

11146_2014_9489_MOESM1_ESM.pdf (143 kb)
ESM 1 (PDF 143 kb)


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Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  • Emanuela Giacomini
    • 1
  • David C. Ling
    • 1
  • Andy Naranjo
    • 1
    Email author
  1. 1.Department of Finance & Real Estate, Hough Graduate School of BusinessUniversity of FloridaGainesvilleUSA

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