The purpose of this paper is to investigate how sub-sectors within the Swedish real estate market has responded to the recent period of increasing policy rates. The categories included in the research are residential and non-residential real estate. We further elaborate the study into internal firm financials, to explore if deviant firm characteristics lead to differences in pricing due to interest rate hikes. The methodology follows an event study structure, where CAPM and cumulative abnormal returns “CAR” are fundamental models. By using CAPM, we estimate predicted returns over a period of contractionary monetary policy. The difference between predicted and actual returns is then cumulated into CAR. Interest rate sensitivity within residential and non-residential real estate can then be determined through CAR as an outcome variable in a panel data regression. CAR is also regressed towards firm financials to examine if deviant firm financials contribute to different interest rate sensitivities. Findings conclude that among the two sub-sectors, residential real estate is more interest rate sensitive than non-residential. This might be explained by Swedish rent regulations, high indebted households, and higher construction costs in the residential sector. Findings further conclude that “Debt-to-equity ratio”, “Interest-to-cash ratio” and the logarithm of market capitalization have deviant effect on interest rate sensitivity among residential and non-residential real estate.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:hj-64514 |
| Date | January 2024 |
| Creators | Bosmyr, Jonathan, Alverhed, Albin |
| Publisher | Jönköping University, IHH, Företagsekonomi |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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