The impact of exchanges rates on international real estate portfolio allocation

This paper, examines whether the asset holdings and weights of an international real estate portfolio using exchange rate adjusted returns are essentially the same or radically different from those based on unadjusted returns. The results indicate that the portfolio compositions produced by exchange rate adjusted returns are markedly different from those based on unadjusted returns. However following the introduction of the single currency the differences in portfolio composition are much less pronounced. The findings have a practical consequence for the investor because they suggest that following the introduction of the single currency international investors can concentrate on the real estate fundamentals when making their portfolio choices, rather than worry about the implications of exchange rate risk.

Hedging private international real estate

The performance of an international real estate investment can be critically affected by currency fluctuations. While survey work suggests large international investors with multi-asset portfolios tend to hedge their overall currency exposure at portfolio level, smaller and specialist investors are more likely to hedge individual investments and face considerable specific risk. This presents particular problems in direct real estate investment due to the lengthy holding period. Prior research investigating the issue relies on ex post portfolio measure, understating the risk faced. This paper examines individual risk using a forward-looking simulation approach to model uncertain cashflow. The results suggest that a US investor can greatly reduce the downside currency risk inherent in UK real estate by using a swap structure – but at the expense of dampening upside potential.

Back from beyond bid-ask spread: estimating liquidity in international markets

Research on the topic of liquidity has greatly benefited from the improved availability of data. Researchers have addressed questions regarding the factors that influence bid-ask spreads and the relationship between spreads and risk, return and liquidity. Intra-day data have been used to measure the effective spread and researchers have been able to refine the concepts of liquidity to include the price impact of transactions on a trade-by-trade analysis. The growth in the creation of tax-transparent securities has greatly enhanced the visibility of securitized real estate, and has naturally led to the question of whether the increased visibility of real estate has caused market liquidity to change. Although the growth in the public market for securitized real estate has occurred in international markets, it has not been accompanied by universal publication of transaction data. Therefore this paper develops an aggregate daily data-based test for liquidity and applies the test to US data in order to check for consistency with the results of prior intra-day analysis. If the two approaches produce similar results, we can apply the same technique to markets in which less detailed data are available and offer conclusions on the liquidity of a wider set of markets.

A note on estimating market–based minimum capital risk requirements: a multivariate GARCH approach

Internal risk management models of the kind popularized by J. P. Morgan are now used widely by the world’s most sophisticated financial institutions as a means of measuring risk. Using the returns on three of the most popular futures contracts on the London International Financial Futures Exchange, in this paper we investigate the possibility of using multivariate generalized autoregressive conditional heteroscedasticity (GARCH) models for the calculation of minimum capital risk requirements (MCRRs). We propose a method for the estimation of the value at risk of a portfolio based on a multivariate GARCH model. We find that the consideration of the correlation between the contracts can lead to more accurate, and therefore more appropriate, MCRRs compared with the values obtained from a univariate approach to the problem.

Adding value to ecological risk assessment with population modeling

Current measures used to estimate the risks of toxic chemicals are not relevant to the goals of the environmental protection process, and thus ecological risk assessment (ERA) is not used as extensively as it should be as a basis for cost-effective management of environmental resources. Appropriate population models can provide a powerful basis for expressing ecological risks that better inform the environmental management process and thus that are more likely to be used by managers. Here we provide at least five reasons why population modeling should play an important role in bridging the gap between what we measure and what we want to protect. We then describe six actions needed for its implementation into management-relevant ERA.

Ownership, occupation and risk: a view of the City of London office market

Office returns in the City of London are more volatile than in other UK markets. This volatility may reflect fluctuations in capital flows associated with changing patterns of ownership and the growing linkage between real estate and financial markets in the City. Using current and historical data, patterns of ownership in the City are investigated. They reveal that overseas ownership has grown markedly since 1985, that owners are predominantly FIRE-sector firms and that there are strong links between ownership and occupation. This raises concerns about future volatility and systemic risk in a market strongly influenced by the cyclical behaviour and shocks of the international financial system.

The type and quantity of dietary fat and carbohydrate alter faecal microbiome and short-chain fatty acid excretion in a metabolic syndrome ‘at-risk’ population syndrome.

An obese-type human microbiota with an increased Firmicutes:Bacteroidetes ratio has been described that may link the gut microbiome with obesity and metabolic syndrome (MetS) development. Dietary fat and carbohydrate are modifiable risk factors that may impact on MetS by altering the human microbiome composition. We determined the effect of the amount and type of dietary fat and carbohydrate on faecal bacteria and short chain fatty acid (SCFA) concentrations in people ‘at risk’ of MetS.

‘Nudging’ energy users: regulatory measures to address the risk of aggregate peak demand in European electricity markets

For decades regulators in the energy sector have focused on facilitating the maximisation of energy supply in order to meet demand through liberalisation and removal of market barriers. The debate on climate change has emphasised a new type of risk in the balance between energy demand and supply: excessively high energy demand brings about significantly negative environmental and economic impacts. This is because if a vast number of users is consuming electricity at the same time, energy suppliers have to activate dirty old power plants with higher greenhouse gas emissions and higher system costs. The creation of a Europe-wide electricity market requires a systematic investigation into the risk of aggregate peak demand. This paper draws on the e-Living Time-Use Survey database to assess the risk of aggregate peak residential electricity demand for European energy markets. Findings highlight in which countries and for what activities the risk of aggregate peak demand is greater. The discussion highlights which approaches energy regulators have started considering to convince users about the risks of consuming too much energy during peak times. These include ‘nudging’ approaches such as the roll-out of smart meters, incentives for shifting the timing of energy consumption, differentiated time-of-use tariffs, regulatory financial incentives and consumption data sharing at the community level.

Studying the impact of ubiquitous monitoring technology on office worker behaviours: the value of sharing research data

Pervasive computing is a continually, and rapidly, growing field, although still remains in relative infancy. The possible applications for the technology are numerous, and stand to fundamentally change the way users interact with technology. However, alongside these are equally numerous potential undesirable effects and risks. The lack of empirical naturalistic data in the real world makes studying the true impacts of this technology difficult. This paper describes how two independent research projects shared such valuable empirical data on the relationship between pervasive technologies and users. Each project had different aims and adopted different methods, but successfully used the same data and arrived at the same conclusions. This paper demonstrates the benefit of sharing research data in multidisciplinary pervasive computing research where real world implementations are not widely available.

An experiment on spatial competition with endogenous pricing

Hotelling's (1929) principle of minimum differentiation and the alternative prediction that firms will maximally differentiate from their rivals in order to relax price competition have not been explicitly tested so far. We report results from experimental spatial duopolies designed to address this issue. The levels of product differentiation observed are systematically lower than predicted in equilibrium under risk neutrality and compatible with risk aversion. The observed prices are consistent with collusion attempts. Our main findings are robust to variations in three experimental conditions: automated vs. human market sharing rule for ties, individual vs. collective decision making, and even vs. odd number of locations.