Corporate Real Estate Holding and Stock Returns


Student thesis: Master's Thesis

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Award date7 Mar 2019


This study investigates the effect of corporate real estate (CRE) holdings on the cross-sectional stock returns. We present clear evidence that the relative corporate real estate holding (RCRE) is negatively related to the cross-sectional return of stocks for the American firms in the full sample. We also find strong evidence that the negative relationship may attribute to the well-documented positive R&D effect on firm return. When we examine different temporal sub-samples, we find that the negative relationship in the pre-crisis period, but a positive relationship for the in-crisis and post-crisis period. The Global Financial Crisis (GFC) seems to be influential on the mechanism that we discover, which appears to be consistent with the collateral-based theories. We also compare the case of international firms. They also display a negative relationship between CRE holdings and stock returns, whether in the full sample or different temporal sub-samples. When we examine further the geographical sub-samples, we find that Japanese and Asia-Pacific firms behave like the U.S. firms, while positive relationships between CRE holdings and stock returns are robustly found among the European firms.