Real Estate Risk in Equity Returns: Empirical Evidence from U.S. Stock Markets

Asset pricing theory aims at linking an asset’s higher return to its higher risk exposure. However, the Capital Asset Pricing Model (CAPM) of Sharpe (1964) and Lintner (1965), the most widely taught model in business and economics classes, has been largely contested in the literature by researchers finding anomalous patterns in equity returns. Based on the failure to match the CAPM with empirical data, researchers have been in an ongoing dispute whether the anomalous behavior in equity retu...