The Effect of Globalization on the Performance of Real Estate Companies: A Post-Mortem of the Great Recession

Abstract: Purpose - The purpose of this paper is to study the effect of openness on the real estate securities' returns on an international sample of 16 countries. Methodology - The paper utilizes 707 publicly traded real estate companies from 16 countries all over the world and is based on panel data to control for the fixed effects of the explanatory variables. Seven factors, such as local market return, size, market-to-book ratio, turnover, GDP growth rate, interest rate spread and openness, are included to study the determinants of returns over 2004 to 2014. Findings - Openness is significantly negatively related to the returns of real estate vehicles. The local market return is confirmed as a prevalent factor in determining the returns, while Fama-French factors such as size and value are supported in some of the regression specifications. Other variables of interest such as turnover and GDP growth are also corroborated as important. Originality - The paper relies on a recent dataset of 11 years capturing at least one full economic cycle to measure the effect of goods market openness on the returns of publicly traded real estate vehicles.