The Future of Commercial Real Estate Market Research: A Case for Applying Machine Learning

2021 ◽  
Author(s):  
Wolfgang Schäfers ◽  
Marcelo Cajias ◽  
Benedict von Ahlefeldt-Dehn
Keyword(s):  
Machine Learning ◽  
Real Estate ◽  
Market Research ◽  
Real Estate Market ◽  
Commercial Real Estate ◽  
The Future

The Determinants of the Ex Ante Risk Premiumin Commercial Real Estate

2019 ◽  
Vol 41 (3) ◽  
pp. 411-441
Author(s):  
El i Beracha ◽  
Julia Freybote ◽  
Zhenguo Lin
Keyword(s):  
Real Estate ◽  
Risk Premium ◽  
Predictive Power ◽  
Real Estate Market ◽  
Commercial Real Estate ◽  
Stock Market Volatility ◽  
Switching Regression ◽  
Risk Premiums ◽  
Debt Capital ◽  
Ex Ante

We investigate the determinants of the ex ante risk premium in commercial real estate. Using a 20-year time series and Markov-switching regression, we find that the ex ante risk premium is affected by fundamental and non-fundamental determinants, albeit not symmetrically when risk premiums are increasing and decreasing. In particular, we find that changes in debt capital market conditions have a higher predictive power for changes in the ex ante risk premium when it is increasing, while changes in stock market volatility and commercial real estate market returns have a higher predictive power when the risk premium is on the decline. In addition, changes in commercial real estate sentiment and NAREIT returns can predict changes in the ex ante risk premium; however, the predictive power of these variables varies across property types and risk premium (risk perception) states.

Sign in / Sign up

Export Citation Format

Share Document