1 Do Discount Rates Predict Returns ?
نویسنده
چکیده
This paper tests whether investors’ discount rates predict ex post investment returns, Jensen’s alpha, and equity market beta in the private commercial real estate market. Using a dataset of 33,338 properties that were worth about 950 billion dollars in the period from 1977 to 2014, I find that properties’ acquisition cap rates, which measure discount rates, have significant predicting power for ex post returns and Jensen’s alpha, but not for beta. This result is robust across property types, metro areas, and is not due to sample selection bias, latent factors, heterogeneous factor loadings, or the pricing of idiosyncratic risk.
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