Abstract
The aim of the paper is to study how trade freedom and financial freedom affect the excess return of real estate security, and we apply annual data for 1,108 publicly traded real estate companies of 24 countries from 2006 to 2013 to examine it. The main findings are as follows : First, for whole sample, the coefficients of the index of trade freedom, the index of financial freedom, are significantly negative, which means that higher freedom of trade and financial will increase efficiency of real estate market but the excess return of real estate will decrease. Second, comparing the effect of the indexes to affect excess return of real estate securities in three different regions, the indexes of financial freedom and Trade freedom are vital factors, but all of four indexes of freedom are important in Europe and other area. Third, the coefficients of indexes of monetary freedom and indexes of trade freedom are negative in both of high and non-high income groups. Finally, for the group of non-high income level, the coefficient of index of investment freedom is negative and the coefficient of index of financial freedom is positive, which are different with the results of the whole sample.
Highlights
Real estate has traditionally been regarded as a local phenomenon
Considering financial liberalization and trade liberalization could change return of the real estate securities, this paper provides new evidence that sheds light on the topic by adding four indices of economic freedom into multifactor model of Bardhan et al [4] to estimate the impact of economic freedom index on real property securities
If the government of developing or undeveloped countries can relax more restrictions of financial system, the results of higher financial freedom could improve the efficiency of financial system, and it will improve the excess returns of real estate securities in non-high income countries
Summary
Real estate has traditionally been regarded as a local phenomenon. In the past few decades, globalization has progressively brought about the internationalization of services sectors as much as of manufacturing, which caused many sub-sectors of the real estate industry have been enthusiastic participants in the global surge (Bardhan and Kroll [3]). Trade liberalization and financial liberalization will promote the global economic integration, which will bring about closer linkage of international real estate securities. The paper establish a model to estimate the impacts of the indices of financial freedom and trade freedom on real estate firms securities returns. This paper contributes to the relevant literature of real estate security returns across countries as follows: First, some empirical studies have showed that a. Considering financial liberalization and trade liberalization could change return of the real estate securities, this paper provides new evidence that sheds light on the topic by adding four indices of economic freedom into multifactor model of Bardhan et al [4] to estimate the impact of economic freedom index on real property securities.
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