On the Earnings and Price Momentum Strategies: Evidence from European Real Estate Firms
Journal of Real Estate Finance and Economics, Vol. 57, No. 3, 2018
University of Connecticut School of Business Research Paper No. 18-29
Posted: 12 Oct 2018 Last revised: 10 Dec 2018
Date Written: September 19, 2018
Abstract
We test the performance and interaction between earnings and price momentum for European real estate companies by first making use of decile portfolios sorted on the previous 3- to 12-month returns, standardized unexpected earnings and a combination of both. Then, the relation is tested on a risk-adjusted basis employing a 3-factor asset pricing model and Fama & Macbeth (1973) cross-sectional regression analyses. Our analyses reveal several critical findings: (10) both price and earnings momentum is effective for European firms, the effect being stronger for the UK than EU firms; (2) unlike U.S. REITs, price momentum strategies depends on the state of the economy, while controlling for systematic factors; (5) idiosyncratic risk of real estate property firms may influence the returns on drift and momentum factors.
Keywords: Earnings Momentum; Price Momentum; REITS; Asset Pricing; European Real Estate; Idiosyncratic Risk
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