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Bridge over ocean
1 May 1997 Financial Analysts Journal Volume 53, Issue 3

Commercial Real Estate Prices and Stock Market Returns: An International Analysis

  1. Daniel C. Quan
  2. Sheridan Titman

The movement toward globalization of institutional investments requires an understanding of the historical relationship between international commercial real estate price changes and stock returns. Previous studies have focused on the time series of stock and real estate returns, using data from a single country. By necessity, these studies examined returns and price changes over short intervals, creating a bias when property values are smoothed from year to year. This study examines the relation between stock returns and changes in property values and rents based on data from 17 countries. Although we find no relation between real estate values and rents and stock returns in the United States, we find significant relations in a number of other countries. When the data are pooled, the relation between stock returns and both value changes and changes in rental rates is very strong.

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