Template-Type: ReDIF-Paper 1.0
Author-Name: Emanuel Kohlscheen 
Author-X-Name-First: Emanuel 
Author-X-Name-Last: Kohlscheen 
Author-Name: Előd Takáts
Author-X-Name-First: Előd 
Author-X-Name-Last: Takáts
Title: What can commercial property performance reveal about bank valuations?
Abstract: We test whether commercial property performance, proxied by real estate investment trust (REIT) prices, can inform us about bank equity prices. Using data from the United States, the euro area and Japan, we show that REIT prices can predict bank equity prices. Furthermore, a "commercial property factor" adds significant explanatory power to both the CAPM and the 3-factor Fama-French model. At the same time, quantile regressions show that this factor becomes particularly prominent during downturns. It accounts for around half of the drop in average bank valuations during the great financial crisis and, again, during the Covid-19 pandemic.
Length: 27 pages
Creation-Date: 2020-11
File-URL: https://www.bis.org/publ/work900.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work900.htm
File-Format: text/html
Number: 900
Keywords: asset prices; banks; commercial property; financial stability; real estate.
Classification-JEL: E44, G12, G21
Handle: RePEc:bis:biswps:900