REP Research Seminar - Presenting in person - Professor Bing Zhu, Technical University of Munich. Title: Infrastructure Risk in Asset Pricing

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Abstract: While the benefits of infrastructure investment have been widely studied, the financial implications of infrastructure risk—particularly its impact on market pricing—remain underexplored. This study seeks to fill this gap by developing a novel firm-level measure of infrastructure risk exposure using textual analysis of 10-K reports from U.S. public companies. We find that infrastructure risk varies by industry, location, and firm traits, with perceived risk linked more to access to reliable utilities, high-speed internet, and climate resilience than traditional infrastructure. Higher infrastructure risk is associated with increased costs, lower profitability, and slower investment growth. Importantly, infrastructure risk is priced in equity markets, with risk-augmented asset pricing models outperforming standard models and a risk premium of up to 1.48% in expected returns. These findings highlight the broad economic and financial importance of infrastructure investment beyond infrastructure sectors.

Bio: Professor Zhu studied construction management in China. She received her doctorate in real estate economics at EBS University of Business and Law in 2011. Before joining the Technical University of Munich in 2019, she worked as a lecturer at the University of Regensburg, the University of Cambridge, and the University of Reading and completed her teaching qualification (Habilitation) at the University of Regensburg in 2018. She serves on the editorial board of the Journal of European Real Estate Research, Journal of Real Estate Research, and Journal of Real Estate Portfolio Management. She is also a board member of the European Commercial Real Estate Data Alliance and the European Real Estate Society.