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 language | English |
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Pages (from-to) | 247-269 |
Number of pages | 23 |
Journal | Journal of Property Research |
Volume | 29 |
Issue number | 3 |
Early online date | 16 May 2012 |
DOIs | |
Publication status | Published - Sept 2012 |
Keywords
- UK commercial property
- ex post risk premium
- regime shift
- Markov Switching Model