The only REIT (Real Estate Investment Trust) in the S&P 100 Index is a self-administered and self-managed largest mall landlord in the United States. Simon Property Group, Inc (NYSE: SPG) established in Indianapolis, Indiana, during 1993 when the shopping center division of Melvin Simon & Associates became a publicly-traded company that owns, develops, manages, leases and acquires primarily regional malls and community shopping centers. With a market cap of $60.8 billion, they are more than twice as large as the next biggest competitor, General Growth Properties. Hence, the following report analyzes SPG monthly performance from January 2005 until October 2015.
In order to study SPG performance through risk and return relationship, two models are used: CAPM and Fama-French models. Before estimating the models, we can see through Table 1 (Pair-Wise Correlations among Variables), that there is a positive relationship among all the variables used in our models, since all correlation coefficients stated in the table by …show more content…
Although the Fama-French model does a better job in explaining the risk premium, it still isn’t enough since we have 49% of unaccounted variation. Thus, further modifications of the model would be a better way of studying this relationship, maybe including omitted variables that add explanatory power to the model and yields better estimates. In conclusion, from the models analyzed, we can not determine that these models as established, hold with this stock, hence further investigation is required, which maybe due to the main points that drive SPG’s business model, for instance, given the industry, the tax regulation makes them pay at least 90% of taxable income to investors as dividend, while being relatively safer investments than other industries in the financial sector and posing as liquid trading
In order to study SPG performance through risk and return relationship, two models are used: CAPM and Fama-French models. Before estimating the models, we can see through Table 1 (Pair-Wise Correlations among Variables), that there is a positive relationship among all the variables used in our models, since all correlation coefficients stated in the table by …show more content…
Although the Fama-French model does a better job in explaining the risk premium, it still isn’t enough since we have 49% of unaccounted variation. Thus, further modifications of the model would be a better way of studying this relationship, maybe including omitted variables that add explanatory power to the model and yields better estimates. In conclusion, from the models analyzed, we can not determine that these models as established, hold with this stock, hence further investigation is required, which maybe due to the main points that drive SPG’s business model, for instance, given the industry, the tax regulation makes them pay at least 90% of taxable income to investors as dividend, while being relatively safer investments than other industries in the financial sector and posing as liquid trading