The Journal of Real Estate Finance and Economics
Volume 12, Issue 2, Article 4 (Abstract)
Title:	The Sensitivity of Bank Stock Returns to Real Estate
Author:	Ling T. He, F.C. Neil Myer and James R. Webb
Abstract:	Banking firms have recently been shifting significantly larger portions of their loan portfolios into real estate. This has caused concern about the continuing economic health of banks, since changes in real estate returns potentially have a significant impact on bank default risk and profitability. By using a three-index model, this study examines the sensitivities of stock returns for different bank groups, based on the percentage of loans in real estate and five different mortgage categories, to changes in real estate market returns. The results of this study indicate that bank stocks, overall, are very sensitive to changes in real estate returns. Banks, with a larger portion of their total loans invested in all types of real estate loans, except farmland loans, are most sensitive to changes in real estate returns.
Keywords:	Sensitivity to real estate, types of real estate loans, proxies of indexes, explanatory power