Browse > Article
http://dx.doi.org/10.6106/KJCEM.2017.18.1.090

Verification of Market's Efficiency and CAPM using Capitalization Rate at Commercial Real Estate Market in Seoul  

Park, Jongkwon (Department of Real Estate, Kangwon National University)
Lee, Jaesu (Department of Real Estate, Kangwon National University)
Jun, Jaebum (Department of Real Estate, Kangwon National University)
Publication Information
Korean Journal of Construction Engineering and Management / v.18, no.1, 2017 , pp. 90-99 More about this Journal
Abstract
This paper is to understand the impact of systematic risk on capitalization rate at office building market and retail real estate market in Seoul and to see if CAPM(Capital Asset Pricing Model) is applicable. For this, this paper considers eight different office building and retail real estate markets in Seoul city area, called GBD, YBD, CBD, and Other Business District, and GBD, SBD, CBD, and Other Business District, to find out if there is any positive-linearity between systematic risk and capitalization rate for each business district not. Then, this paper tries to verify applicability of CAPM to four office building markets and four retail real estate markets with Black, Jensen, and Scholes(1972)'s statistical methodology. At last, the result shows that there is positive linearity between systematic risk and capitalization rate only GBD except Others(YBD, CBD, and other business district) in office building market. In addtion, SBD and CBD, they could be figured out that it is not efficient market because increasing systematic risk declines capitalization rate in retail real estate market. However, CAPM is not applicable in all office building(GBD, YBD, CBD, and other business district) and retail real estate markets(GBD, SBD, CBD, and other business district) in Seoul.
Keywords
Commercial Real Estate Market; Systematic Risk; Capitalization Rate; Capital Asset Pricing Model; Office Building; Retail Real Estate Market; Seoul City;
Citations & Related Records
Times Cited By KSCI : 3  (Citation Analysis)
연도 인용수 순위
1 Kim,H.,and Kim,H. (2006). "A Study on the Characteristics of Regional Land Price Fluctuation Using CAPM in Korea." Journal of Korea Planning Association ,41(2),pp. 121-137.
2 Kim,M. (1998). "An Empirical Study on the Application Possibility of the Capital Asset Pricing Model in Korea Land Market." Thesis, Konkuk University, 72.
3 Lee, D., and Lee, Y. (2012). "Study on Estimation of Market Capitalization Rates of the Office Building Market." The Koea Spatial Planning Review, 75, pp. 105-128.   DOI
4 Lee,S.,andLee,H. (2005). "Estimation of Capitalization Rates and Gross Income Multipliers in Seoul Office Market."Journal of Korea Planning Association,40(6),pp. 245-256.
5 Lintner,J. (1965). "The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets." The Review of Economics and Statistics,47(1), pp. 13-37.   DOI
6 Markowitz,H. (1952)."Portfolio Selection." The Journal of Finance, 7(1), pp. 77-91.   DOI
7 Min,S. (1999). "Study on the Methods of Risk Measurement for the Valuation of Real Estate Investment." Thesis, Yonsei University, 133.
8 Min,S.,andKoh,S. (2013). "A Test on the Efficiency of the Office Market in Seoul." Journal of Korea Planning Association,48(1),pp. 69-79.
9 Ministry of Land, Infrastructure, and Transport & Korea Appraisal Board. (2009 1Q-2015 3Q). Leasing Trends Survey of Commercial Real Estate Market.
10 Moon,H.,and Cho,J. (2012). "A Study on the Risk Premium through Office Capitalization Rate Analysis." Journal of Korea Planning Association,47(3),pp. 345-361.
11 Mossin,J. (1966). "Equilibrium in a Capital Asset Market." The EconometricSocietyEconometrica, 34(4), pp.768-783.   DOI
12 Jun,Jaebum. (2013). Lecture Note of Real Estate Investment Theory at Kangwon National University.
13 Park, J., and Jun, J. (2015a). "Diversified Investment of Commercial Real Estate Assets: Focused on Office Building and Retail Real Estate Markets in Seoul." Korean Journal of Construction Engineering and Management, KICEM, 16(6), pp. 144-155.   DOI
14 Mullins, D. (1982). "Does the Capital Asset Pricing Mode l Work?" Harvard Business Review.
15 Park, J., and Jun, J. (2015a). "Diversified Investment of Commercial Real Estate Assets: Focused on Office Building and Retail Real Estate Markets in Seoul." Korean Journal of Construction Engineering and Management, KICEM, 16(6), pp. 144-155.   DOI
16 Park, J., and Jun, J. (2015b). "Applicability of CAPM (Capital Asset Pricing Model) to Office Building Market in Seoul." Journal of the Architectural Institute of Korea Planning & Design, 31(8), pp. 93-102.   DOI
17 Park, J., and Jun, J. (2016). "Application of CAPM (Capital Asset Pricing Model) to Reatail Real Estate Market in Seoul." Appraisal Studies, 15(2), pp. 1-18.   DOI
18 Ross, S., Westerfield, R., amd Jaffe, J. (2009). Corporate Finance. 9th ed, McGraw-Hill.
19 Ryu,T. (1993). "An Empirical Study of the Capital Asset Pricing Model in Korea Real Estate Market Analysis." Thesis, Korea University, 42.
20 Sharpe,W. (1964). "A Theory of Market Equilibrium under Conditions of Risk." The Journal of Finance, 19(3), pp. 425-442
21 Fama,E.,and MacBeth,J. (1973). "Risk, Return, and Equilibrium: Empirical Tests." Journal of Political Economy, 81(3), pp. 607-636.   DOI
22 Shin,J. (1993). "A Study on the Application of the Capital Asset Pricing Model to the Land Market in Korea." Ph.D. Dissertation, Incheon University, 181.
23 Suh,B.,and Kim,J. (2006). "A Study on the Price Equilibrium of Korea Housing Market UsingC APM ." Journal Finance and Accounting Information, 6(2), pp. 44-72.
24 Yoo,J.,Lee,J.,and Son,J. (2010). "A Preliminary Study on Application of CAPM to Seoul Housing Sub-markets." Journal of the Korea Real Estate Analysts Association, 16(2), pp. 39-57.
25 Bank of Korea. Economic Statistics System (http://ecos.bok.or.kr).
26 Black,F.,Jensen,M.,andScholes,M. (1972). "The Capital Asset Pricing Model : Some Empirical Test. New York." Praeger Publishers, pp. 79-121.