A comparative analysis of listed and unlisted real estate investments : a Norwegian perspective

Abstract

This master thesis examines the performance of listed and unlisted real estate investments in Norway over the past eleven years, and tests whether real estate stocks in Norway are predominantly driven by the progress of the underlying real estate market or by the general stock market. Deviating from the conventional procedure of only focusing on unlisted real estate, real estate stocks and the general stock market, we take into account the macroeconomic environment in Norway as well. Following this approach allow us to consider if listed and unlisted real estate respond differently to macroeconomic factors and whether this can explain the disparity in returns.

Evaluations using Sharpe ratio and CAGR suggests that unlisted real estate investments outperform listed on a risk-adjusted basis, but when considering the arithmetic mean of expected return listed investments outperforms. Furthermore, our results imply that listed real estate investments tends to follow the general stock market, both short- and long-term, based on correlation analysis and the CAPM. Here we also find that investments in unlisted real estate yields the highest abnormal return. Lastly, with the use of the multifactor-model we find that the Indirect Index and OSEAX share the same significant macroeconomic factors, whereas IPD appears sheltered from them.