The Time-Varying Nature of Reits

Zhu Bing ()
Additional contact information
Zhu Bing: Department of Land Economy, University of Cambridge

Real Estate Management and Valuation, 2018, vol. 26, issue 1, 26-38

Abstract: This paper investigates changes in the nature of REITs by estimating the time-varying long-run relationship among securitized real estate, direct real estate, and stock performance. The informational environment of U.S. REITs has matured gradually since their introduction. As more information on this asset class has become available, the “true” nature of REITs has thus become more apparent. We find that the long-term elasticity of direct real estate total returns on REIT total returns has increased since 1980, and became significant at the beginning of the 1990s, while the elasticity of general equity total returns remained insignificant. During the 2000s, the underlying property market was able to predict nearly 30% of REIT variance in the long term. Consequently, ignoring changes in the “nature” of REITs may lead to an underestimation of the influence from the underlying property market, and misspecification of the optimal weights in the long-term inter-asset portfolio.

Keywords: Time-varying cointegration; Extended Vector Error Correction Model; Direct Real Estate; Securitized Real Estate; Diversification (search for similar items in EconPapers)
JEL-codes: C58 R30 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.2478/remav-2018-0003 (text/html)

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:vrs:remava:v:26:y:2018:i:1:p:26-38:n:3

DOI: 10.2478/remav-2018-0003

Access Statistics for this article

Real Estate Management and Valuation is currently edited by Sabina Zrobek

More articles in Real Estate Management and Valuation from Sciendo
Bibliographic data for series maintained by Peter Golla ().