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Predictability of Equity REIT Returns: Implications for Property Tactical Asset Allocation

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Author Info

  • John Okunev

    ()
    (Global Alpha Portfolio Management Pty Ltd., 10 Arnold St, Queens Park, Sydney, 2022, Australia)

  • Patrick J. Wilson

    ()
    (School of Finance and Economics, University of Technology, Sydney, Australia)

Abstract

This study presents further evidence of the predictability of excess equity REIT (real estate investment trust) returns. Recent evidence on forecasting excess returns using fundamental variables has resulted in diminishing returns from the 1990’s onward. Trading strategies based on these forecasts have not significantly outperformed the buy/hold strategy of the 1990’s. We have developed an alternative strategy that is based on the time variation of the risk premium of investors. Our results indicate that it is possible to outperform the buy/hold strategy by modeling the time variation of the risk premium. By modeling the dynamic behavior of the risk premium, we are able to implicitly capture economic risk premiums that are not captured by conventional multi beta asset pricing models.

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Bibliographic Info

Article provided by Asian Real Estate Society in its journal International Real Estate Review.

Volume (Year): 11 (2008)
Issue (Month): 2 ()
Pages: 32-46

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Handle: RePEc:ire:issued:v:11:n:02:2008:p:32-46

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Postal: Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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Web page: http://www.asres.org/

Order Information:
Postal: Asian Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
Email:
Web: http://www.asres.org/

Related research

Keywords: Equity REIT; Predictability; Risk premium;

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