Economy – Quantitative Finance – Portfolio Management
Scientific paper
2011-03-30
Economy
Quantitative Finance
Portfolio Management
Scientific paper
Real Estate Investment Trusts (REITs) are the only truly liquid assets related to real estate investments. We study the behavior of U.S. REITs over the past three decades and document their return characteristics. REITs have somewhat less market risk than equity; their betas against a broad market index average about .65. Decomposing their covariances into principal components reveals several strong factors. REIT characteristics differ to some extent from those of the S&P/Case-Shiller (SCS) residential real estate indexes. This is partly attributable to methods of index construction. Our examination of REITs suggests that investment in real estate is far more risky than what might be inferred from the widely-followed SCS series. REITs, unlike SCS series are forward looking, and this helps them in the prediction of SCS returns. REIT forecasts of SCS returns are reasonably precise over a number of periods.
Cotter John
Roll Richard
No associations
LandOfFree
A Comparative Anatomy of REITs and Residential Real Estate Indexes: Returns, Risks and Distributional Characteristics does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.
If you have personal experience with A Comparative Anatomy of REITs and Residential Real Estate Indexes: Returns, Risks and Distributional Characteristics, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and A Comparative Anatomy of REITs and Residential Real Estate Indexes: Returns, Risks and Distributional Characteristics will most certainly appreciate the feedback.
Profile ID: LFWR-SCP-O-569623