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Apartment REITs and Apartment Real Estate

This study employs a "hedged" apartment REIT index to track the performance of apartment real estate and to assess the performance of apartments in efficient mixed-asset portfolios consisting of stocks, bonds and real estate. The hedged apartment index reflects the returns of apartment REITs after the effects of equity REITs and the stock market are removed from the apartment REIT returns. It is demonstrated that the hedged apartment REIT index captures a substantial amount of the volatility unique to apartment real estate. Furthermore, the hedged apartment REIT index does not suffer from the appraisal-smoothing problem and the apparent seasonality of appraisal-based indices, such as the Russell-NCREIF apartment index. Therefore, it would appear that the hedged apartment REIT index can be employed as a proxy for apartment real estate in portfolio allocation decisions. This study provides evidence that apartment real estate should be a candidate for some efficient mixed-asset portfolios.

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Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

Volume (Year): 11 (1996)
Issue (Month): 3 ()
Pages: 277-290

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Handle: RePEc:jre:issued:v:11:n:3:1996:p:277-290
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American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323

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Order Information: Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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  1. S. Michael Giliberto, 1988. "A Note on the use of Appraisal Data in Indexes of Performance Measurement," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(1), pages 77-83.
  2. William C. Wheaton & Raymond G. Torto, 1989. "Income and Appraised Values: A Reexamination of the FRC Returns Data," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(4), pages 439-449.
  3. James L. Kuhle, 1987. "Portfolio Diversification and Return Benefits--Common Stock vs. Real Estate Investment Trusts (REITs)," Journal of Real Estate Research, American Real Estate Society, vol. 2(2), pages 1-9.
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