The Other Side of Value: The Effect of Quality on Price and Return in Real Estate

  • Sara Kelly Anzinger
  • Chinmoy Ghosh
  • Milena PetrovaEmail author


We examine the effect of quality on price and return in real estate. Quality real estate stocks generally trade at higher prices. However, similar to findings in the aggregate stock market (Asness et al. 2013), quality in listed real estate is not fully reflected in price. A long quality, short junk portfolio (QMJ) is found to produce average risk-adjusted returns of 3.6 % per quarter (14.4 % annually). QMJ has a significantly positive coefficient when added as a dependent variable to a 4-factor model explaining U.S. real estate excess returns, including market, size, value and momentum factors, and leads to a small improvement in the overall fit of the model. Further investigation of the components of quality shows that profitability has a consistently positive relationship with real estate excess returns, while higher dividend payout is consistently associated with lower returns, in contrast to findings for conventional firms.


Quality attributes Firm performance Real estate prices Real estate returns 


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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  • Sara Kelly Anzinger
    • 1
  • Chinmoy Ghosh
    • 2
  • Milena Petrova
    • 3
    Email author
  1. 1.S.K.Anzinger ConsultingAmsterdamNetherlands
  2. 2.Department of Finance, School of BusinessUniversity of ConnecticutStorrsUSA
  3. 3.Department of Finance, Whitman School of ManagementSyracuse UniversitySyracuseUSA

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