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The Predictability of Equity REIT Returns: Time Variation and Economic Significance

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  • Ling, David C
  • Naranjo, Andy
  • Ryngaert, Michael D

Abstract

This article presents evidence on predictability of excess returns for equity REITs relative to the aggregate stock market, small-capitalization stocks, and T-bills using best-fit models from prior time periods. We find that excess equity REIT returns are far less predictable out-of-sample than in-sample. This inability to forecast out-of-sample is particularly true in the 1990s. Nevertheless, in the absence of transaction costs, active-trading strategies based on out-of-sample predictions modestly outperform REIT buy-and-hold strategies. However, when transaction costs are introduced, profits from these active-trading strategies largely disappear. Copyright 2000 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Journal of Real Estate Finance & Economics.

Volume (Year): 20 (2000)
Issue (Month): 2 (March)
Pages: 117-36

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Handle: RePEc:kap:jrefec:v:20:y:2000:i:2:p:117-36

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Web page: http://www.springerlink.com/link.asp?id=102945

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Cited by:
  1. Colin Lizieri & Stephen Satchell & Qi Zhang, 2006. "The Underlying Return Generating Factors for REIT Returns: An Application of Independent Component Analysis," Real Estate & Planning Working Papers rep-wp2006-12, Henley Business School, Reading University.
  2. Carolina Fugazza & Massimo Guidolin & Giovanna Nicodano, 2009. "Time and risk diversification in real estate investments: assessing the ex post economic value," Working Papers 2009-001, Federal Reserve Bank of St. Louis.
  3. Lee, Chien-Chiang & Chien, Mei-Se & Lin, Tsoyu Calvin, 2012. "Dynamic modelling of real estate investment trusts and stock markets," Economic Modelling, Elsevier, vol. 29(2), pages 395-407.
  4. S. Price & Dean Gatzlaff & C. Sirmans, 2012. "Information Uncertainty and the Post-Earnings-Announcement Drift Anomaly: Insights from REITs," The Journal of Real Estate Finance and Economics, Springer, vol. 44(1), pages 250-274, January.
  5. John Cotter & Simon Stevenson, 2011. "Uncovering Volatility Dynamics in Daily REIT Returns," Papers 1103.5417, arXiv.org.
  6. Dirk Brounen & Piet Eichholtz & David Ling, 2007. "Trading Intensity and Real Estate Performance," The Journal of Real Estate Finance and Economics, Springer, vol. 35(4), pages 449-474, November.
  7. Veera Lenkkeri & Wessel Marquering & Ben Strunkmann-Meister, 2006. "The Friday Effect in European Securitized Real Estate Index Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 33(1), pages 31-50, August.
  8. Gregory H. MacKinnon & Ashraf Al Zaman, 2009. "Real Estate for the Long Term: The Effect of Return Predictability on Long-Horizon Allocations," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(1), pages 117-153.
  9. Carolina Fugazza & Massimo Guidolin & Giovanna Nicodano, 2007. "Investing for the Long-run in European Real Estate," The Journal of Real Estate Finance and Economics, Springer, vol. 34(1), pages 35-80, January.
  10. Carolina Fugazza & Massimo Guidolin & Giovanna Nicodano, 2010. "1/N and Long Run Optimal Portfolios: Results for Mixed Asset Menus," Carlo Alberto Notebooks 190, Collegio Carlo Alberto.

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