Abstract
This paper uses a multi-factor latent variable model to examine the time variation of expected returns on Asian property stocks. Using data from 1990 to 1997, we found strong evidence of time-varying risk premium, suggesting property development based on constant discount rate may underestimate the cost of capital. A further study using a multi-country model suggests that conditional excess returns of many crisis-stricken economies appear to move quite closely with each other. This supports the hypothesis that the risk premiums in these Asian markets move closely over time As a result, they provide a partial explanation of market contagion in the region.
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Mei, J.(.P., Hu, J. Conditional Risk Premiums of Asian Real Estate Stocks. The Journal of Real Estate Finance and Economics 21, 297–313 (2000). https://doi.org/10.1023/A:1012008004402
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DOI: https://doi.org/10.1023/A:1012008004402