The inflation hedging characteristics of US and UK investments: a multi-factor error correction approach

Historic analysis of the inflation hedging properties of stocks produced anomalous results, with equities often appearing to offer a perverse hedge against inflation. This has been attributed to the impact of real and monetary shocks to the economy, which influence both inflation and asset returns. It has been argued that real estate should provide a better hedge: however, empirical results have been mixed. This paper explores the relationship between commercial real estate returns (from both private and public markets) and economic, fiscal and monetary factors and inflation for US and UK markets. Comparative analysis of general equity and small capitalisation stock returns in both markets is carried out. Inflation is subdivided into expected and unexpected components using different estimation techniques. The analyses are undertaken using long-run error correction techniques. In the long-run, once real and monetary variables are included, asset returns are positively linked to anticipated inflation but not to inflation shocks. Adjustment processes are, however, gradual and not within period. Real estate returns, particularly direct market returns, exhibit characteristics that differ from equities.

Renewable energy in the UK countryside: policy and practice

Of the technologies currently available for producing energy from renewable sources in the British climate all except one depend on a single ingredient, namely land. Therefore other than offshore wind generation, which has been slow and expensive to establish, renewables have had to be derived almost entirely from the land, whether as sites for turbines or areas on which to grow feedstocks for biomass and biofuels. Of these, only wind turbines have been developed in any number while economic conditions have until now been unfavourable for biomass and biofuel. The UK is unlikely to meet its present targets under the Kyoto agreement, due to a mixture of limited funding and problems of policy. Peter Prag examines the present position and the potential outlook.

Transforming tradition: performances of Jingju ('Beijing Opera') in the UK

Jingju (‘Beijing opera’) is China's most iconic traditional theatre, marketed as a global signifier of Chinese theatre and national identity. Although troupes from mainland China regularly tour Europe, audiences in the UK have also had access to Jingju via two indigenous organizations: the UK Beijing Opera Society (now defunct) and the London Jing Kun Opera Association (now in its ninth year). These organizations consist of Chinese, overseas Chinese and Western performers performing both Jingju and Kunju (‘Kun opera’). Where there is a mix of ethnicity, can ‘traditional Chinese theatre’ still be conceived of as ‘traditional’? How is Jingju mapped onto non-Chinese bodies? Can Jingju performances by ethnically white performers reflect diasporic identities? Drawing on the theories of Judith Butler and Homi Bhabha, this article argues that by highlighting the performativity of identity, the performance of Jingju by non-Chinese performers challenges the notion of Jingju as a global signifier of ‘authentic traditional Chinese theatre’.

Non-normal real estate return distributions by property type in the UK

Investment risk models with infinite variance provide a better description of distributions of individual property returns in the IPD UK database over the period 1981 to 2003 than normally distributed risk models. This finding mirrors results in the US and Australia using identical methodology. Real estate investment risk is heteroskedastic, but the characteristic exponent of the investment risk function is constant across time – yet it may vary by property type. Asset diversification is far less effective at reducing the impact of non‐systematic investment risk on real estate portfolios than in the case of assets with normally distributed investment risk. The results, therefore, indicate that multi‐risk factor portfolio allocation models based on measures of investment codependence from finite‐variance statistics are ineffective in the real estate context

Perspectives on the role of UK planning in land and property markets

There is a popular view that land use planning regulations (‘planning’) is hostile to both development and the development industry. Part of the reason for the prominence of this view is the homogenising of the notion of ‘planning’ and its reduction to development control. This paper argues that panning controls in the UK are far more sophisticated and, drawing upon empirical evidence of key property interests proposes a more complex and nuanced view of planning controls that, in large part, has the support of the developers and others.

Lease maturity and initial rent: is there a term structure for UK commercial property leases?

This paper investigates the relationship between lease maturity and rent in commercial property. Over the last decade market-led changes to lease structures, the threat of government intervention and the associated emergence of the Codes of Practice for commercial leases have stimulated growing interest in pricing of commercial property leases. Seminal work by Grenadier (1995) derived a set of hypotheses about the pricing of different lease lengths in different market conditions. Whilst there is a compelling theoretical case for and a strong intuitive expectation of differential pricing of different lease maturities, to date the empirical evidence is inconclusive. Two Swedish studies have found mixed results (Gunnelin and Soderbergh 2003 and Englund et al 2003). In only half the cases is the null hypothesis that lease length has no effect rejected. In the UK, Crosby et al (2003) report counterintuitive results. In some markets, they find that short lease terms are associated with low rents, whilst in others they are associated with high rents. Drawing upon a substantial database of commercial lettings in central London (West End and City of London) over the last decade, we investigate the relationship between rent and lease maturity. In particular, we test whether a building quality variable omitted in previous studies provides empirical results that are more consistent with the theoretical and intuitive a priori expectations. It is found that initial leases rates are upward sloping with the lease term and that this relationship is constant over time.

A geography of the UK commercial property market

This paper revisits some ideas that were first raised seriously in the mid-90s; that it should be possible to establish linkages (in spatial terms) between local economic factors and sector performance in commercial real estate markets. There have been a number of developments in the quality and quantity of relevant data over the intervening period that make it appropriate to return to have another look at some of these ideas in a more ‘modern’ technological context. Using data from several sources this exploratory paper seeks therefore to look at some of the spatial patterns that can be derived from the data. It examines the extent to which it is possible to make linkages and visualise the geographical structure of those markets and their change over time. Naturally there remain strong limitations on the extent to which it is possible to achieve ‘good’ results in this kind of analysis, and one major intention of the paper is to encourage a debate about how data sets can be developed and improved to allow these methods to be taken further.

Holding periods and investment performance: analysing UK office returns 1983-2003

Drawing on a unique database of office properties constructed for Gerald Eve by IPD, this paper examines the holding periods of individual office properties sold between 1983 and 2003. It quantifies the holding periods of sold properties and examines the relationship between the holding period and investment performance. Across the range of holding periods, excess returns (performance relative to the market) are evenly distributed. There are as many winners as there are losers. The distribution of excess returns over different holding periods is widely spread with the risk of under-performance greater over short holding periods. Over the longer term, excess performance is confined to a narrow range and individual returns are more likely to perform in line with the market as a whole.

Analysing UK real estate market forecast disagreement

Given the significance of forecasting in real estate investment decisions, this paper investigates forecast uncertainty and disagreement in real estate market forecasts. Using the Investment Property Forum (IPF) quarterly survey amongst UK independent real estate forecasters, these real estate forecasts are compared with actual real estate performance to assess a number of real estate forecasting issues in the UK over 1999-2004, including real estate forecast error, bias and consensus. The results suggest that real estate forecasts are biased, less volatile compared to market returns and inefficient in that forecast errors tend to persist. The strongest finding is that real estate forecasters display the characteristics associated with a consensus indicating herding.

An evaluation of the performance of UK real estate forecasters

Given the significance of forecasting in real estate investment decisions, this paper investigates forecast uncertainty and disagreement in real estate market forecasts. It compares the performance of real estate forecasters with non-real estate forecasters. Using the Investment Property Forum (IPF) quarterly survey amongst UK independent real estate forecasters and a similar survey of macro-economic and capital market forecasters, these forecasts are compared with actual performance to assess a number of forecasting issues in the UK over 1999-2004, including forecast error, bias and consensus. The results suggest that both groups are biased, less volatile compared to market returns and inefficient in that forecast errors tend to persist. The strongest finding is that forecasters display the characteristics associated with a consensus indicating herding.