Professor Charles Ward
Professor Charles Ward
- Emeritus Professor of Property Investment and Finance
Profile & Expertise
Charles Ward has held university posts in Lancaster, Stirling and Reading and has an economics degree from Cambridge, an MA in Finance from Exeter and a PhD from Reading. Before moving to the ICMA Centre, he was Professor of Property Investment and Finance in the School of Real Estate and Planning. His previous post was Professor of Accounting and Finance at Stirling University.
He has a long standing association with professional education in Investment, having been the first Chief Examiner of the Society of Investment Analysts – which later become CFA UK. On moving to Reading, he concentrated on the area of real estate and developed the application of financial models to real estate markets. Amongst his innovative research was the earliest published application of option pricing theory to real estate (1982), the de-smoothing of property investment returns and inflation (1988). More recent work has been exploring the financial behaviour of property markets, the relationship between property markets and property securities and the pricing of real estate lease contracts.
His research spans a wide range of investment, finance, accounting and real estate and has been published in many journals including the Journal of Financial and Quantitative Analysis, Journal of Business Finance and Accounting, Oxford Bulletin of Economics and Statistics, Journal of Industrial Economics, Journal of Banking and Finance, Journal of Portfolio Management and Real Estate Economics.
Key publications, books, research & papers
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Motivated monitoring: the importance of the institutional investment horizon
This paper investigates whether institutional investors that hold shares in a ﬁrm for a relatively long time aﬀect ﬁrm performance. We measure performance by Return on Assets (ROA), Tobin’s Q and Earnings Yield and ﬁnd that long-term ownership has a positive, long-lasting eﬀect on ﬁrm performance. We minimize concerns about endogeneity by incorporating random shocks from changes in the constituents of the Russell Index. We further ﬁnd that the incentive for monitoring ﬁrm performance associated with long-term holding is more important than some conventional classiﬁcations of investors in improving ﬁrm value. Even for investors usually classiﬁed as short term, ﬁrm performance will be enhanced for those ﬁrms in which they hold stocks over longer periods. We also ﬁnd that a positive link between institutional owners and ﬁrm performance does not exist when investors only hold the stock for a short term. Overall, our paper supports the argument that institutional investors’ monitoring enhances ﬁrm value
Institutional investor monitoring motivation and the marginal value of cash
This paper examines whether the motivation of institutional investors in monitoring a firm is positively related to the relative importance of the firm’s stock in their portfolios. We find that greater motivated monitoring institutional ownership is associated with a higher marginal value of corporate cash holdings, which cannot be explained by other corporate governance measures and institution types. Further, we find that the economic effect of institutional monitoring on the marginal value of cash falls with decreasing institutions’ monitoring motivation. Based on these findings, we construct a monitoring motivation-weighted institutional ownership measure and document a positive relation between it and the marginal value of cash. Our results are robust after controlling for the endogeneity of institutional ownership, three cash regimes, firm size, and changes in US public firms over time.
Speculative bubble spillovers across regional housing markets
In this paper we determine whether speculative bubbles in one region in the United States can lead bubbles to form in others. We first apply a regime-switching model to determine whether speculative bubbles existed in the U.S. regional residential real estate markets. Our findings suggest that the housing markets in five of the nine census divisions investigated were characterized by speculative bubbles. We then examine the extent to which bubbles spill over between neighboring and more distant regions, finding that the transmission of speculative bubbles and nonfundamentals between regions is multidirectional and does not depend on contiguity or distance
The performance effects of composition changes on sector specific stock indices: The case of European listed real estate
This paper examines the impact of changes in the composition of real estate stock indices, considering companies both joining and leaving the indices. Stocks that are newly included not only see a short-term increase in their share price, but trading volumes increase in a permanent fashion following the event. This highlights the importance of indices in not only a benchmarking context but also in enhancing investor awareness and aiding liquidity. By contrast, as anticipated, the share prices of firms removed from indices fall around the time of the index change. The fact that the changes in share prices, either upwards for index inclusions or downwards for deletions, are generally not reversed, would indicate that the movements are not purely due to price pressure, but rather are more consistent with the information content hypothesis. There is no evidence, however, that index changes significantly affect the volatility of price changes or their operating performances as measured by their earnings per share.
Intrinsic and rational speculative bubbles in the U.S. housing market 1960-2011
This paper examines the dynamics of the residential property market in the United States between 1960 and 2011. Given the cyclically and apparent overvaluation of the market over this period, we determine whether deviations of real estate prices from their fundamentals were caused by the existence of two genres of bubbles: intrinsic bubbles and rational speculative bubbles. We find evidence of an intrinsic bubble in the market pre-2000, implying that overreaction to changes in rents contributed to the overvaluation of real estate prices. However, using a regime-switching model, we find evidence of periodically collapsing rational bubbles in the post-2000 market
House price dynamics and their reaction to macroeconomic changes
This article applies a three-regime Markov switching model to investigate the impact of the macroeconomy on the dynamics of the residential real estate market in the US. Focusing on the period between 1960 and 2011, the methodology implemented allows for a clearer understanding of the drivers of the real estate market in “boom”, “steady-state” and “crash” regimes. Our results show that the sensitivity of the real estate market to economic changes is regime-dependent. The paper then proceeds to examine whether policymakers are able to influence a regime switch away from the crash regime. We find that a decrease in interest rate spreads could be an effective catalyst to precipitate such a change of state.
Commercial real estate and equity market bubbles: are they contagious to REITs?
This paper uses a regime-switching approach to determine whether prices in the US stock, direct real estate and indirect real estate markets are driven by the presence of speculative bubbles. The results show significant evidence of the existence of periodically partially collapsing speculative bubbles in all three markets. A multivariate bubble model is then developed and implemented to evaluate whether the stock and real estate bubbles spill over into REITs. The underlying stock market bubble is found to be a stronger influence on the securitised real estate market bubble than that of the property market. Furthermore, the findings suggest a transmission of speculative bubbles from the direct real estate to the stock market, although this link is not present for the returns themselves.
The S&P500 index effect reconsidered: evidence from overnight and intraday stock price performance and volume
A re-examination of the index effect: gambling on additions to and deletions from the S&P 500's ‘gold seal’
Back from beyond the bid-ask spread: estimating liquidity in international markets
Investment performance and lease structure change in the UK: research finding
Turner, N., Cullen, I., Marsh, J., Ward, C.
Real estate rental payments: application of stock-inventory modeling
Valuing and pricing retail leases with renewal and overage options
Hendershott, P.H. and Ward, C.
Monetary integration and real estate markets: an investigation of the impact of the introduction of a single currency on real estate performance
Lizieri, C. M.
This paper assesses the impact of the monetary integration on different types of stock returns in Europe. In order to isolate European factors, the impact of global equity integration and small cap factors are investigated. European countries are sub-divided according to the process of monetary convergence. Analysis shows that national equity indices are strongly influenced by global market movements, with a European stock factor providing additional explanatory power. The global and European factors explain small cap and real estate stocks much less well –suggesting an increased importance of ‘local’ drivers. For real estate, there are notable differences between core and non-core countries. Core European countries exhibit convergence – a convergence to a European rather than a global factor. The non-core countries do not seem to exhibit common trends or movements. For the non-core countries, monetary integration has been associated with increased dispersion of returns, lower correlation and lower explanatory power of a European factor. It is concluded that this may be explained by divergence in underlying macro-economic drivers between core and non-core countries in the post-Euro period.
Corporate equity and commercial property market 'bubbles'
Hendershott, P.H., Hendershott, R.J. and Ward, C.
Continental shift? An analysis of convergence trends in European real estate equities
Lizieri, C. M.
Can profitable trading strategies be derived from investment best-sellers?
A glance along the finance shelves at any bookshop reveals a large number of books that seek to show readers how to ‘make a million’ or ‘beat the market’ with allegedly highly profitable equity trading strategies. This paper investigates whether useful trading strategies can be derived from popular books of investment strategy, with What Works on Wall Street by James P. O’Shaughnessy used as an example. Specifically, we test whether this strategy would have produced a similarly spectacular performance in the UK context as was demonstrated by the author for the US market. As part of our investigation, we highlight a general methodology for determining whether the observed superior performance of a trading rule could be attributed in part or in entirety to data mining. Overall, we find that the O’Shaughnessy rule performs reasonably well in the UK equity market, yielding higher returns than the FTSE All-Share Index, but lower returns than an equally weighted benchmark