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Investment Risk in the Context of Price Changes on the Real Estate and Stock Markets

Investment Risk in the Context of Price Changes on the Real Estate and Stock Markets Abstract The residential real estate market is thought to show a tendency for wide fluctuations in prices, as a result of which price bubbles appear. This element of risk has a direct bearing on investors interested in speculation and those seeking to meet their housing needs. Wide fluctuations in the values of real estate affect the investors’ financial situation in many ways, by determining the possibility of meeting one’s housing needs, reducing or sometimes raising creditworthiness, and by increasing investment risk measured by volatility. Omitting the obvious social dimension of the residential real estate market and concentrating on its financial aspects, the author of the article analyses to what degree wide swings in prices can be recognized as specific to this market. To this end, the volatility of prices in the stock market and in the secondary housing market in Poland is compared. An analysis is performed to establish which of them has higher average volatility measures or rates of return, i.e. which of them is more profitable or secure for investors. Statistical tests are used to find out whether average rates of return or measures of risk are equal or different between the two markets. The results of the research show that the secondary housing market and the stock market differ concerning cumulative average rates of return and standard deviations. In the first of them, they are respectively higher and lower. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Real Estate Management and Valuation de Gruyter

Investment Risk in the Context of Price Changes on the Real Estate and Stock Markets

Real Estate Management and Valuation , Volume 24 (1) – Mar 1, 2016

Investment Risk in the Context of Price Changes on the Real Estate and Stock Markets


The residential real estate market is thought to show a tendency for wide fluctuations in prices, as a result of which price bubbles appear. This element of risk has a direct bearing on investors interested in speculation and those seeking to meet their housing needs. Wide fluctuations in the values of real estate affect the investors' financial situation in many ways, by determining the possibility of meeting one's housing needs, reducing or sometimes raising creditworthiness, and by increasing investment risk measured by volatility. Omitting the obvious social dimension of the residential real estate market and concentrating on its financial aspects, the author of the article analyses to what degree wide swings in prices can be recognized as specific to this market. To this end, the volatility of prices in the stock market and in the secondary housing market in Poland is compared. An analysis is performed to establish which of them has higher average volatility measures or rates of return, i.e. which of them is more profitable or secure for investors. Statistical tests are used to find out whether average rates of return or measures of risk are equal or different between the two markets. The results of the research show that the secondary housing market and the stock market differ concerning cumulative average rates of return and standard deviations. In the first of them, they are respectively higher and lower. Key words: capital market, real estate market, risk of investments, price changes. JEL Classification: G11, G12, R31. Citation: Wolski R., 2016, Investment Risk in the Context of Price Changes on the Real Estate and Stock Markets, Real Estate Management and Valuation, Vol. 24, No. 1, pp. 41-50. DOI: 10.1515/remav-2016-0004. 1. Introduction Investors may choose from a range of investment options, but their decisions determine future rates of return. The author assumed for the purposes of this article that the obstacles investors face were not a...
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Publisher
de Gruyter
Copyright
Copyright © 2016 by the
ISSN
2300-5289
eISSN
2300-5289
DOI
10.1515/remav-2016-0004
Publisher site
See Article on Publisher Site

Abstract

Abstract The residential real estate market is thought to show a tendency for wide fluctuations in prices, as a result of which price bubbles appear. This element of risk has a direct bearing on investors interested in speculation and those seeking to meet their housing needs. Wide fluctuations in the values of real estate affect the investors’ financial situation in many ways, by determining the possibility of meeting one’s housing needs, reducing or sometimes raising creditworthiness, and by increasing investment risk measured by volatility. Omitting the obvious social dimension of the residential real estate market and concentrating on its financial aspects, the author of the article analyses to what degree wide swings in prices can be recognized as specific to this market. To this end, the volatility of prices in the stock market and in the secondary housing market in Poland is compared. An analysis is performed to establish which of them has higher average volatility measures or rates of return, i.e. which of them is more profitable or secure for investors. Statistical tests are used to find out whether average rates of return or measures of risk are equal or different between the two markets. The results of the research show that the secondary housing market and the stock market differ concerning cumulative average rates of return and standard deviations. In the first of them, they are respectively higher and lower.

Journal

Real Estate Management and Valuationde Gruyter

Published: Mar 1, 2016

References