The Reciprocal Impact between the London Stock Market and UK real estate market

Table of Contents

Chapter 1: Introduction3

Outline of the paper3

Background of the study3

Problem Statement4

Aims & objectives6

Chapter 2: Literature Review6

Chapter 3: Methodology10

Research design10

Sample frame10

Methods of Data collection11

Data Analysis12

Limitations of the study13

Ethical/ Professional Issues14

Research Timetable14

References16

Appendix20

Equations20

Chapter 1: Introduction

Outline of the paper

This research focuses on the various aspects of reciprocal impact between London stock market And UK real estate markets and comprises of the following chapters:

(1)Introduction

(2)Literature Review

(3)Methodology

(4)Results and Discussion

(5)Conclusion

Background of the study

Investment generally entails the commitment of a lump sum now for future streams of income flow and/or for capital appreciation. Puts in a different context, it is an acquisition of an asset by an individual or institution with a view to earning returns, either through its income or capital gains. In investment market, investors are generally faced with numerous alternative investments where fund could be ejected. These include stocks and shares, bonds, unit trusts, bank deposit and landed property. This diversity eventually creates the problem of choice, which according to Hargitay and Yu (2003) is one of the fundamental problems of investment decision-making. This requires investors to choose from myriad of opportunities that differs not only in the amount of required initial capital outlay, but also in the timing and amount of expected future flows and the degree of confidence that can be placed in the expectations. The choices are expected to take into consideration the characteristics of the various assets and the linkages among them (Hoesli and MacGregor, 2000) since investment funds will only flow to the sectors that promise the most attractive return in the light of expected risks and returns trade off.

The implication of the foregoing is that investors usually have to reckon with the problem of choice, which requires the establishment of criteria and rational basis for assessing the desirability or otherwise of the acquisition of an individual investment proposition. Success, in this regard, is most dependent upon finding strategically appropriate investment opportunities and being able to accurately forecast their past performance. Such forecasting must also consider the performance of the investment media relatives to other similar assets and to different types of investment assets (Hargitay and Yu, 2003; Hwa, 2002).

Problem Statement

In the past, property investment decisions, based on the foregoing, was majorly an acquisition of direct investment in real property through private market that consists of buildings owned and managed by investors or their agents. But, with the development of the new financing arrangements for UK real estate in the capital markets, investors now have the opportunity to include property in a diversified portfolio by acquiring a security backed by direct real estate investment through public markets.

However, it has been argued that for UK real estate securities to be reasonable substitute for direct real estate investment, they should provide investment characteristics similar to those of direct investment. These, according to Kapplan and Schwartz (2005) are assumed to be competitive return/risk relationships, hedge against inflation and low correlations with the security markets returns over ...