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dc.contributor.authorHanisch, Alexander Thomas-
dc.descriptionDBA Thesisen_US
dc.description.abstractReal estate is the last major asset class without liquid derivatives markets. The reasons for that are not fully known or understood. Therefore, the aim of the current research is to better understand the main factors that influence the propensity of commercial real estate investors in the U.K. to employ property derivatives. The research methodology that was chosen for the current research is grounded theory which, in its original form, goes back to Glaser and Strauss (1967). A total of 43 interviews were conducted with 46 real estate professionals in the U.K. from property investment management firms (investing directly or indirectly in real estate), multi-asset management firms, real estate investment trusts (REITs), banks, and brokerage and advisory firms, among others. The research results show 29 factors that influence the propensity of direct and indirect real estate investors in the U.K to employ property derivatives. Out of the 29 factors, the current research identified 12 factors with high explanatory power, 6 with a contributing role, and 11 with low explanatory power. Moreover, factors previously discussed in the literature are tested and assessed as to their explanatory power. From the research data, three main reasons have been identified as the sources of investor reluctance to trade in property derivatives. The first and main reason is related to a mismatch between motivations of property investment managers and what can be achieved with the instruments. The second reason, which ties in with the first one, is a general misunderstanding as to the right pricing technique of property derivatives. Finally, the third reason is a general lack of hedging demand from the investor base owing to the long investment horizons through market cycles. The research contributes to the literature on property derivatives in various ways. First, it extends the literature on market hurdles in property derivatives markets by testing and extending the hurdles that were proposed previously. Second, the research shows that the existing price models need to be extended in order to iii account for the risk perception of practitioners and their concerns with regard to liquidity levels. For both theory and practice, the research has shown some limitations in using property derivatives for purposes such as creating index exposure or hedging. Another contribution, in this case to practice, is that this study provides a clearer picture as to the reasons that keep property investment managers away from using property derivatives. Furthermore, it has been shown that liquidity per se is not a universal remedy for the problems in the market. In addition to the need for improving the understanding of the pricing mechanism, practitioners should give more thought to the notion of real estate market risk and the commensurate returns that can reasonably be expected when they take or reduce it. This implies that property index futures currently do not price like those on any other investable asset class.en_US
dc.publisherNewcastle Universityen_US
dc.titleFactors influencing the propensity of real estate investors in the U.K. to employ property derivatives : a surveyen_US
Appears in Collections:Newcastle University Business School

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