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Article
Publication date: 10 August 2021

Abdullah Alfalah, Eamonn D’Arcy, Steffen Heinig and Simon Stevenson

The purpose of this paper is to examine the sensitivity of the Kuwait housing market to major local and regional geo-political and economic events.

Abstract

Purpose

The purpose of this paper is to examine the sensitivity of the Kuwait housing market to major local and regional geo-political and economic events.

Design/methodology/approach

This paper examines the market dynamics of the housing market in Kuwait. Kuwait provides an interesting market to consider owing to its position as a major oil producer, its sensitivity to geo-political events and its unusual demographic characteristics.

Findings

The error-correction model highlights that market is relatively volatile, with evidence of mean-reverting behaviour. Only when the data is smoothed are their more consistent findings with respect to underlying fundamentals. This paper also examines the response of the market to seven regional and local events. Of particular interest is that the one event that results in a consistent significant response is domestic legislation directly concerned with housing. This has a far greater impact than local or regional geo-political events.

Originality/value

Very few papers have considered how economic and political shocks directly impact housing markets using an event study approach. Given its geographic location and also its economic dependence on oil, Kuwait is an interesting market to consider.

Details

International Journal of Housing Markets and Analysis, vol. 15 no. 4
Type: Research Article
ISSN: 1753-8270

Keywords

Article
Publication date: 22 August 2018

Frank Kwakutse Ametefe, Steven Devaney and Simon Andrew Stevenson

The purpose of this paper is to establish an optimum mix of liquid, publicly traded assets that may be added to a real estate portfolio, such as those held by open-ended…

Abstract

Purpose

The purpose of this paper is to establish an optimum mix of liquid, publicly traded assets that may be added to a real estate portfolio, such as those held by open-ended funds, to provide the liquidity required by institutional investors, such as UK defined contribution pension funds. This is with the objective of securing liquidity while not unduly compromising the risk-return characteristics of the underlying asset class. This paper considers the best mix of liquid assets at different thresholds for a liquid asset allocation, with the performance then evaluated against that of a direct real estate benchmark index.

Design/methodology/approach

The authors employ a mean-tracking error optimisation approach in determining the optimal combination of liquid assets that can be added to a real estate fund portfolio. The returns of the optimised portfolios are compared to the returns for portfolios that employ the use of either cash or listed real estate alone as a liquidity buffer. Multivariate generalised autoregressive models are used along with rolling correlations and tracking errors to gauge the effectiveness of the various portfolios in tracking the performance of the benchmark index.

Findings

The results indicate that applying formal optimisation techniques leads to a considerable improvement in the ability of the returns from blended real estate portfolios to track the underlying real estate market. This is the case at a number of different thresholds for the liquid asset allocation and in cases where a minimum return requirement is imposed.

Practical implications

The results suggest that real estate fund managers can realise the liquidity benefits of incorporating publicly traded assets into their portfolios without sacrificing the ability to deliver real estate-like returns. However, in order to do so, a wider range of liquid assets must be considered, not just cash.

Originality/value

Despite their importance in the real estate investment industry, comparatively few studies have examined the structure and operation of open-ended real estate funds. To the authors’ knowledge, this is the first study to analyse the optimal composition of liquid assets within blended or hybrid real estate portfolios.

Details

Journal of Property Investment & Finance, vol. 37 no. 1
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 14 April 2022

Abdullah Alfalah, Simon Stevenson, Steffen Heinig and Eamonn D’Arcy

This paper aims to improve the housing affordability by measuring the housing affordability in a resource-rich economy and studying the impact of implementing new policies .

Abstract

Purpose

This paper aims to improve the housing affordability by measuring the housing affordability in a resource-rich economy and studying the impact of implementing new policies .

Design/methodology/approach

This paper seeks to test the impact of new policies introduced to the Kuwaiti housing market to improve affordability. In 2008, the Kuwaiti parliament introduced two policies: a tax on empty lands and, forbidding companies to own or develop residential lands or houses.

Findings

By constructing the housing affordability index and the price-to-income multiplier using observations from 2004 until 2017, it has been found that affordability has worsened over time regardless of the new policies introduced in 2008. Housing in Kuwait became “severely unaffordable” (equivalent to London in the UK, San Diego in USA and Toronto in Canada).

Originality/value

Even with its unique condition, as a rich country, small population and availability of white land and other resources, the affordability worsened over time. Introducing new policies without solving the central issue of housing supply challenges seems not worth it. This paper is the first of its kind on the Kuwait housing market, and it provides a valuable foundation for future research on this market and similar markets in the region.

Details

International Journal of Housing Markets and Analysis, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1753-8270

Keywords

Article
Publication date: 1 June 2005

Stephen Lee and Simon Stevenson

The use of modern portfolio theory (MPT) in the construction real estate portfolios has two serious limitations when used in an ex ante framework: the intertemporal…

4508

Abstract

Purpose

The use of modern portfolio theory (MPT) in the construction real estate portfolios has two serious limitations when used in an ex ante framework: the intertemporal instability of the portfolio weights; and the sharp deterioration in performance of the optimal portfolios outside the sample period used to estimate asset mean returns. Both problems can be traced to wide fluctuations in sample means. Aims to prove that the use of a procedure that ignores the estimation risk due to the uncertain in mean returns is likely to produce sub‐optimal results in subsequent periods.

Design/methodology/approach

This study extends previous ex ante‐based studies by evaluating ex post optimal portfolio allocations in subsequent test periods by using methods that have been proposed to reduce the effect of measurement error on optimal portfolio allocations.

Findings

While techniques designed to handle estimation risk in capital market studies have yielded promising results, they are not completely successful in improving out‐of‐sample performance in this case. It is hypothesised that such results are due to the cyclical nature of property and that the contrarian and mean‐reversion effects picked up in studies of stocks and bonds are not captured when an asset such as direct property is examined. This conclusion is also supported by the strong performance of the tangency portfolios, and in particular the classical unadjusted Sharpe portfolio, over the shorter horizons, which would be consistent with a cyclical momentum effect.

Originality/value

The results suggest that the consideration of the issue of estimation risk is crucial in the use of MPT in developing a successful real estate portfolio strategy.

Details

Journal of Property Investment & Finance, vol. 23 no. 3
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 1 February 2004

Simon Stevenson

This study re‐examines the potential role that direct real estate can play in institutional mixed‐asset portfolios. The paper examines the statistical improvement in…

2073

Abstract

This study re‐examines the potential role that direct real estate can play in institutional mixed‐asset portfolios. The paper examines the statistical improvement in performance that can result from the inclusion of real estate in an international mixed asset portfolio, using both in‐sample and out‐of‐sample data. Using US real estate data the results provide evidence that in most cases real estate does not lead to a significant improvement in portfolio performance in sample. However, out‐of‐sample tests indicate that the asset does provide a valuable diversification asset, with significant improvements in performance relative to a base capital market only portfolio.

Details

Journal of Property Investment & Finance, vol. 22 no. 1
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 1 June 2001

Simon Stevenson

This study utilises style analysis to examine the effective asset mix of UK property companies, using both an unadjusted data set and one adjusted for leverage and general…

2609

Abstract

This study utilises style analysis to examine the effective asset mix of UK property companies, using both an unadjusted data set and one adjusted for leverage and general stock market sentiment. The findings illustrate that the style benchmarks are largely spilt between mid and small cap stocks and government bonds, while when the adjusted data set is examined, the role of fixed‐income securities is enhanced together with that of Treasury Bills and the direct property market. The resulting style portfolios are then used to assess the investment performance of the property companies. The results reveal that there is a high degree of consistency in terms of the performance ranking obtained, across both alternative performance measures and between the original and adjusted samples. However, very few of the performance statistics are found to be statistically significant at conventional levels.

Details

Journal of Property Investment & Finance, vol. 19 no. 3
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 1 June 2003

Stephen Lee and Simon Stevenson

In estimating the inputs into the modern portfolio theory (MPT) portfolio optimisation problem, it is usual to use equal weighted historic data. Equal weighting of the…

2427

Abstract

In estimating the inputs into the modern portfolio theory (MPT) portfolio optimisation problem, it is usual to use equal weighted historic data. Equal weighting of the data, however, does not take account of the current state of the market. Consequently this approach is unlikely to perform well in any subsequent period as the data is still reflecting market conditions that are no longer valid. The need for some return weighting scheme that gives greater weight to the most recent data would seem desirable. Therefore, this study uses returns data which are weighted to give greater weight to the most recent observations to see if such a weighting scheme can offer improved ex ante performance over that based on unweighted data.

Details

Journal of Property Investment & Finance, vol. 21 no. 3
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 1 May 2007

Simon Stevenson

ARIMA models have been extensively examined in the context of the real estate market. The purpose of this paper is to examine issues relating to their application in a…

3544

Abstract

Purpose

ARIMA models have been extensively examined in the context of the real estate market. The purpose of this paper is to examine issues relating to their application in a forecasting context. Specifically, the paper seeks to examine whether in‐sample measures of best‐fit and also past forecasting accuracy bear any relation to future forecasting performance.

Design/methodology/approach

The forecasting performance of alternative ARIMA specifications are compared over rolling estimation and forecasting windows. The forecasting accuracy of the alternative specifications is compared with specific attention placed on the accuracy of the respective specification that in‐sample provides the best fitting model.

Findings

The results highlight the limitations in using the conventional approach to identifying the best‐specified ARIMA model in sample, when the purpose of the analysis is to provide forecasts. The results show that while ARIMA models can be useful in anticipating broad market trends, there are substantial differences in the forecasts obtained using alternative specifications. The use of conventional measures of best‐fit provide little indication as to future forecasting ability, nor does the forecasting performance of a specification in previous periods.

Originality/value

ARIMA modelling has frequently been highlighted as a useful forecasting approach. This paper illustrates that care needs to be paid in their use in a forecasting context and full appreciation of the strengths and limitations of the ARIMA approach.

Details

Journal of Property Investment & Finance, vol. 25 no. 3
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 1 August 2000

Simon Stevenson

This paper re‐examines the role of real estate within mixed asset portfolios from the perspective of an Irish portfolio manager. The nature of the investment market in the…

1323

Abstract

This paper re‐examines the role of real estate within mixed asset portfolios from the perspective of an Irish portfolio manager. The nature of the investment market in the Republic of Ireland leads to the study extending the existing literature by expanding the universe of assets beyond a solely domestic setting and by imposing constraints on the optimal portfolios. Irish funds generally hold proportionately more in international equities than in the domestic market due to the small and illiquid nature of the Irish market; therefore, unconstrained tests do not adequately model the behaviour of Irish portfolio managers. The study finds that while real estate plays an important role in both the domestic and international unconstrained portfolios, it exits the optimal portfolios at relatively low return levels. Additionally, the real estate series adjusted for smoothing fails to enter any of the optimal portfolios. However, the use of 20 per cent band constraints leads to an increase in the diversification role real estate can play in a mixed asset portfolio, with the asset maintaining a presence up to more acceptable return levels.

Details

Journal of Property Investment & Finance, vol. 18 no. 4
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 1 February 2004

Simon Stevenson and James Young

This study examines the relationship between guide and sale prices for residential properties in Greater Dublin during the recent housing boom. The results indicate that…

1569

Abstract

This study examines the relationship between guide and sale prices for residential properties in Greater Dublin during the recent housing boom. The results indicate that degrees of divergence can be present, auctioned properties tend to sell more frequently at a premium to their guide price and that the average level of premium is also higher. These findings are confirmed by econometric analysis. It is proposed that the two potential causes behind this mis‐pricing are the speculative boom in the Dublin market during the period and the possibility that agents build into auction guide prices an element of underpricing in order to increase interest in the properties on the market.

Details

Property Management, vol. 22 no. 1
Type: Research Article
ISSN: 0263-7472

Keywords

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