The Stock-REIT Relationship and Optimal Asset Allocations

Doug Waggle and Pankaj Agrrawal

Journal of Real Estate Portfolio Management, 2006, vol. 12, issue 3, 209-221

Abstract: Executive Summary.In this paper, the marginal effects of changes (due to non-stationarity or estimation errors) in the REIT-stock risk premium and the REIT-stock correlation on the optimal portfolio asset mix of REITs, stocks, and bonds are determined. Employing a mean-variance utility function and considering different levels of investor risk aversion, the findings reveal that the expected return of REITs, relative to that of stocks, is a much more important factor than the REIT-stock correlation in making portfolio decisions. A 1% change in the forecast return for REITs dramatically impacts optimal portfolio allocations for investors of all risk levels. A significant change of 0.1 in the REIT-stock correlation, on the other hand, has only minimal impact on optimal portfolio weights.

Date: 2006
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/10835547.2006.12089747 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:repmxx:v:12:y:2006:i:3:p:209-221

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/repm20

DOI: 10.1080/10835547.2006.12089747

Access Statistics for this article

Journal of Real Estate Portfolio Management is currently edited by Peng Liu and Vivek Sah

More articles in Journal of Real Estate Portfolio Management from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().