Forecasting EREIT Returns
AbstractThis paper analyzes the role played by financial assets, direct real estate, and the Fama and French factors in explaining EREIT returns and examines the usefulness of these variables in forecasting returns. Four models are analyzed and their predictive potential is assessed by comparing three forecasting methods: time varying coefficient (TVC) regressions, vector autoregressive (VAR) systems, and neural networks models. Trading strategies on these forecasts are compared to a passive buy-and-hold strategy. The results show that EREIT returns are better explained by models including the Fama and French factors. The VAR forecasts are better than the TVC forecasts, but the best predictions are obtained with neural networks and especially when they are applied to the model using stock, bond, real estate, size, and book-to-market factors.
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Bibliographic InfoPaper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 07-35.
Length: 37 pages
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Forecasting; Multifactor Models; EREITs; Securitized Real Estate;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
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- Camilo Serrano & Martin Hoesli, .
"Are Securitized Real Estate Returns more Predictable than Stock Returns?,"
Swiss Finance Institute Research Paper Series
08-27, Swiss Finance Institute.
- Camilo Serrano & Martin Hoesli, 2010. "Are Securitized Real Estate Returns more Predictable than Stock Returns?," The Journal of Real Estate Finance and Economics, Springer, vol. 41(2), pages 170-192, August.
- Camilo Serrano & Martin Hoesli, 2012. "Fractional Cointegration Analysis of Securitized Real Estate," The Journal of Real Estate Finance and Economics, Springer, vol. 44(3), pages 319-338, April.
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