Asset Allocation and Predictability of Real Estate Returns

Rakesh Bharati () and Manoj Gupta
Additional contact information
Rakesh Bharati: Department of Finance Southern Illinois University at Edwardsville Edwardsville, Illinois 62026, http://www.siue.edu/BUSINESS/depart/econfin/econfin.htm
Manoj Gupta: Department of Finance, Real Estate and Decision Sciences The Wichita State University Wichita, Kansas 67260-0088, http://www.twsu.edu/~finance/

Journal of Real Estate Research, 1992, vol. 7, issue 4, 469-484

Abstract: We examine the issue of optimal asset allocation among three broad classes of assetsà à Large Stocks (proxied by the S&P composite index); real estate assets (a portfolio of thirty Equity Real Estate Investment Trusts (REITs) traded on major stock exchanges); and the risk-free asset (the one-month T-bill), employing the evidence on their predictability. An active strategy of investing in the assets, using predicted returns from our model outperforms investing in passive strategies, which are combinations of asset classes with fixed weights for the entire period of the study. Thus our superior performance is not due to diversification alone.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 1992
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Citations: View citations in EconPapers (11)

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