The significance and performance of property companies on the AIM stock market

• Published in: Journal of European real estate research Vol. 11; no. 1; pp. 28 - 43
• Main Authors: Newell, Graeme, Marzuki, Muhammad Jufri Bin
• Format: Journal Article
• Language: English
• Published: Bingley Emerald Publishing Limited 01.01.2018; Emerald Group Publishing Limited
• Subjects: Accounting; Advisors; Corporate governance; Diversification; Due diligence; Initial public offerings; Institutional investments; Investments; New stock market listings; REITs; Stock exchanges; Italy; United Kingdom > UK; Asia; Europe; Germany; Russia; Post-GFC recovery; AIM property companies; Property portfolios; Risk-adjusted returns; UK; Portfolio diversification
• ISSN: 1753-9269; 1753-9277
• DOI: 10.1108/JERER-09-2016-0033

Purpose The Alternative Investment Market (AIM) is an important UK growth-focused stock market. The purpose of this paper is to assess the significance, risk-adjusted performance and portfolio diversification benefits of property companies on the AIM stock market over 2005-2015. The post-Global Financial Crisis (GFC) recovery of property companies on AIM is highlighted, as well as their performance compared with property companies on the London Stock Exchange (LSE) main board. Design/methodology/approach Using monthly total returns, the risk-adjusted performance and portfolio diversification benefits of property companies on the AIM stock market over 2005-2015 are assessed and compared with a range of other asset classes. Sub-period analysis is used to assess the post-GFC recovery of the property companies on AIM. Findings Property companies on AIM delivered poor risk-adjusted returns over 2005-2015, with limited portfolio diversification benefits with the overall AIM stock market. However, since the GFC, property companies on AIM have delivered strong risk-adjusted returns, with improved portfolio diversification benefits with the overall AIM stock market. This post-GFC performance is shown to be more than a small cap effect, reflecting the property portfolios in these AIM property companies. Despite this strong post-GFC performance, the AIM property companies under-performed property companies on the LSE main board on a risk-adjusted basis. Practical implications AIM provides an important platform for property companies seeking start-up and growth opportunities in a less-regulated funding environment. This has been reinforced by strong risk-adjusted performance in a post-GFC context. However, the stronger risk-adjusted performance of LSE listed property companies and their superior scale, resources and higher quality property portfolios present challenges for increased investor support for the AIM property companies going forward. Originality/value This paper is the first published empirical research analysis of the risk-adjusted performance and diversification benefits of property companies on the AIM stock market. This research enables empirically validated, more informed and practical property investment decision-making regarding the strategic role of property companies on the AIM stock market in a portfolio.