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 journalJournal articlepeer-review

    22 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
    Early online date13 Jan 2015
    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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