The Hedged REIT Index and Mixed-Asset Portfolios

Youguo Liang and James Webb

Journal of Real Estate Portfolio Management, 1996, vol. 2, issue 1, 55-61

Abstract: Executive Summary. As international investing becomes more and more popular, studies of mixed-asset portfolios can no longer ignore foreign securities. This study investigates the role of U.S. commercial real estate in mixed-asset portfolios consisting of U.S. common stocks, U.S. bonds and international common equity. Historically, real estate performance has been measured by appraisal-based indices, such as the Russell-NCREIF index. It is well known that these indices suffer from appraisal-smoothing and seasonality problems. Therefore, using the Russell-NCREIF index, for example, in asset allocation decisions might be incorrect because the estimated correlations of real estate with other assets and the estimated volatility of real estate tend to be biased. A hedged equity REIT index, which reflects the returns of equity REITs after the effects of the general stock market are removed from REIT returns, is used in this study to proxy the performance of commercial real estate. The results indicate that investors should diversify into commercial real estate and international equity. For example, an efficient portfolio, which has the same expected return as a traditional portfolio of 60% stocks and 40% bonds, should have 44% of its funds in U.S. commercial real estate, 26% in U.S. common stocks, 19% in international common stocks, and 11% in U.S. bonds.

Date: 1996
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/10835547.1996.12089522 (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:2:y:1996:i:1:p:55-61

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

DOI: 10.1080/10835547.1996.12089522

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 ().