Regime Shifts in Ex Post UK Commercial Property Risk Premiums

Norman Hutchison, Patricia Fraser, Alastair Adair, Rahul Srivatsa

    Research output: Contribution to journalArticle

    3 Citations (Scopus)

    Abstract

    Using a Markov Switching Model, the hypothesis that ex post commercial sector risk premiums have stable mean values within a time-varying framework is investigated. The probabilities of shifting expected values and the transitional probabilities of remaining in a high (low)-risk state at each point in time were estimated. Results suggest that industrial and retail sectors exhibit regime shifting behaviour although the probability of shifting between high- and low-risk states, while significant, was low compared to them remaining the same. Investigation of the transitional probabilities suggested the propensity to shift regimes differs between sectors, but is generally more prevalent in periods of relative uncertainty.
    Original languageEnglish
    Pages (from-to)247-269
    Number of pages23
    JournalJournal of Property Research
    Volume29
    Issue number3
    Early online date16 May 2012
    DOIs
    Publication statusPublished - Sep 2012

    Keywords

    • UK commercial property
    • ex post risk premium
    • regime shift
    • Markov Switching Model

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