Evaluating the Performance of Real Estate Exchange-Traded Funds

Davinder K. Malhotra ()
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Davinder K. Malhotra: School of Business, Thomas Jefferson University (East Falls Campus), 4201 Henry Ave., Philadelphia, PA 19144, USA

JRFM, 2023, vol. 17, issue 1, 1-20

Abstract: This study examines the net monthly returns of real estate exchange-traded funds (ETFs) through various performance evaluation models and market situations. The results reveal that these ETFs generated positive alphas and outperformed benchmark indices in absolute returns. However, their performance varied across market conditions, demonstrating both outperformance and underperformance compared to U.S. and global stocks. During the COVID-19 pandemic, real estate ETFs displayed a decline, trailing behind U.S. and global equities in both absolute returns and risk-adjusted performance. This emphasized their vulnerability during economic crises. Utilizing the Carhart four-factor model, significant exposure of real estate ETFs to the stock market was observed. Moreover, an assessment of ETF portfolio managers’ skills indicated proficiency in security selection but limited capabilities in market timing.

Keywords: real estate exchange-traded funds; COVID-19; alpha; Fama–French model; Sharpe ratio; Sortino ratio; Omega ratio (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
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