Rahul Srivatsa and Stephen L. Lee
The purpose of this paper is to test the extent of convergence in rents and yields in the European real estate office market.
Abstract
Purpose
The purpose of this paper is to test the extent of convergence in rents and yields in the European real estate office market.
Design/methodology/approach
The paper uses the concepts of beta‐convergence and sigma‐convergence to evaluate empirically the hypothesis of rent and yield convergence in seven European office markets during the period 1982‐2009. Because of the introduction of a single currency in January 1999, the analysis is carried out sequentially, first for the overall sample period and then the periods before and after the introduction of the single currency.
Findings
The results indicate that, irrespective of the time period considered, there is not enough statistical evidence of beta‐convergence in either rents or yields but evidence of significant sigma‐convergence in rents and yields in the European office markets under review. Additionally, some evidence is found that the introduction of the single currency in 1999 has led to increasing signs of convergence, especially in the Continental European markets.
Practical implications
The results show that the real estate office markets in Europe are not fully integrated and so indicate that diversification across Europe is still a viable investment strategy.
Originality/value
This is the first paper to use beta and sigma convergence tests on European office market data.
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Rahul Srivatsa, Andrew Smith and Jon Lekander
The purpose of this paper is to develop a more robust methodology for asset allocation for the property investment market which takes into account inherent valuation and data…
Abstract
Purpose
The purpose of this paper is to develop a more robust methodology for asset allocation for the property investment market which takes into account inherent valuation and data issues.
Design/methodology/approach
The methodology applied is that of a bootstrap, borrowed from Carlstein, and is applied to an investment universe consisting of UK equities, gilts and property. The bootstrap selectively re‐samples the return time series by maintaining the economic cycle. The resulting return series is then used in the standard mean‐variance optimisation (MVO) on an unconstrained basis. Finally, a “sanity” test is applied on the correlation matrix to ensure that spurious instances do not skew the results.
Findings
The bootstrapped optimisation provides a range within which the portfolio weights can be manoeuvred instead of a static point under the standard MVO. It provides a more robust methodology for asset allocation and without giving any undue significance to one year of extreme result.
Research limitations/implications
The current analysis is based on unconstrained portfolio optimisation, with a very limited investment universe. Additionally, by conforming with the MVO methodology, normality of asset returns is implicitly assumed, which is clearly not the case in the data used. Future work will also focus on an all‐property portfolio.
Practical implications
The proposed methodology will prove to be useful for making asset allocation decisions, particularly in turbulent financial markets.
Originality/value
The paper focuses solely on bootstrapping with the IPD UK annual index and is particularly significant after one year of extremely poor performance of UK property. The results will be of use to fund managers and portfolio analysts.
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Norman Hutchison, Patricia Fraser, Alastair Adair and Rahul Srivatsa
The aim of this paper is to consider the appropriate benchmark risk free rate sui for pricing of property investments in the UK and, in doing so, investigate the financial…
Abstract
Purpose
The aim of this paper is to consider the appropriate benchmark risk free rate sui for pricing of property investments in the UK and, in doing so, investigate the financial characteristics and performance of the UK gilt yields. European investors have been significant players in the UK commercial property market during the last decade and in order to be competitive in bidding situations with UK‐based investors, require to be aware of the pricing criteria adopted.
Design/methodology/approach
This paper analyses the stability, yield distribution and volatility of both conventional gilts and index‐linked gilts with different maturities over the period 1980‐2010. It considers the changing structure of the UK commercial property market and reports on a questionnaire survey of the UK property investment community, which focused on the rationale behind the selection of the appropriate risk free rate of return.
Findings
The analysis suggests that ten‐year index‐linked gilts have been the most stable, but that if conventional gilts are preferred, then five‐year nominal appear to be more stable than ten‐year nominal; ten‐year real yields are smoother and relatively less volatile. In the authors' survey of the UK property investment fund managers and their advisors, the majority, but by no means all of the respondents, used the ten‐year nominal gilt yield as their risk free rate of return. However, questions were raised as to whether it was appropriate to use spot or average gilt yields, particularly when rates in 2009/2010 had fallen to such low level.
Originality/value
The findings provide a better understanding of how the different maturities of gilts behave. Insight is given on the criteria adopted by investors when selecting the risk free rate.
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Syed Azam Pasha Quadri, Girish Srivatsa Rentala and Raghavendra Sarap
Over past decades, the fossil fuel reserves in the world have been decreasing at an alarming rate and a lack of crude oil is expected in the early decades of this century. Also…
Abstract
Purpose
Over past decades, the fossil fuel reserves in the world have been decreasing at an alarming rate and a lack of crude oil is expected in the early decades of this century. Also, the eco-neutral pollutants such as carbon monoxide (CO), oxides of nitrigen (NOx) and unburnt hydrocarbons (UHC) are also increasing. This calls for innovative research in non-conventional fuels to replace fossil fuels. Hydrogen is one such fuel which has an exceptional combustion property and appears to be proving itself as the best transportation fuel of the future. On the other hand, compressed natural gas(CNG) has already been credited as a remarkable fuel for its better emission characteristics and has been implemented as a transportation fuel in metros. Therefore, the use of hydrogen blended with natural gas seems to be a viable alternative to pure fossil fuels because of the expected reduction of the total pollutants and increase of efficiency. This paper aims to investigate this issue.
Design/methodology/approach
In the present experimental investigation, 10 and 20 per cent of hydrogen–CNG mixture(HCNG) by mass of fuel is inducted into the combustion chamber in conjunction with air in HCNG–diesel dual fuel mode. The variation in injection opening pressure is assessed to optimize the performance and emission characteristics.
Findings
Experiments were conducted at three different injection opening pressures, i.e. 200, 220 and 240 bar, at full-load condition and the performance characteristics were calculated. The effect of injection operating pressure(IOP) on emissions were measured and compared with pure diesel mode.
Originality/value
Brake thermal efficiency (BTE) was increased by 1.2 per cent at 220 bar. Minimum BSFC of 0.2302 kg/kWh, 0.2114 kg/kWh was noticed for 220 bar with a changing ratio of 20 per cent of HCNG. It was noticed that CO and UHC decreased with variation in IOP and HCNG content in the blend. However, there was an increase in NOx emissions.