Which is a better investment choice in the Hong Kong residential property market: a big or small property?

Zhuo Qiao*, Wing Keung WONG

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

18 Citations (Scopus)

Abstract

The relationship between property size and property investment yield is an interesting issue in the real estate market. Previous studies usually use the mean–variance criterion to compare the return-risk profiles of the yields of different property sizes in the United States. However, this criterion has a few shortcomings. This article provides the first attempt to use a stochastic dominance approach to analyse this issue. We adopt two powerful stochastic dominance tests to compare the yields of five property size classes in the Hong Kong residential property market. In our study, we analyse two possible investment outcomes: (1) investors could not rent out their properties, and thus they would gain/lose from the appreciation/depreciation of residential property prices; (2) investors could also gain from rental incomes. Our empirical results provide strong evidence to show that the yields of smaller property classes stochastically dominate the yields of bigger property classes, suggesting that buying smaller properties is a better investment choice in the Hong Kong residential property market.

Original languageEnglish
Pages (from-to)1670-1685
Number of pages16
JournalApplied Economics
Volume47
Issue number16
DOIs
Publication statusPublished - 3 Apr 2015

Scopus Subject Areas

  • Economics and Econometrics

User-Defined Keywords

  • Hong Kong residential property market
  • mean–variance criterion
  • property size
  • stochastic dominance

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