Predicting Securitized Real Estate Returns: Financial and Real Estate Factors vs. Economic Variables
Securitized real estate returns have traditionally been forecasted using economic variables. However, no consensus exists regarding the variables to use. Financial and real estate factors have recently emerged as an alternative set of variables useful in forecasting securitized real estate returns. This paper examines whether the predictive ability of the two sets of variables differs. We use fractional cointegration analysis to identify whether long-run nonlinear relations exist between securitized real estate and each of the two sets of forecasting variables. That is, we examine whether such relationships are characterized by long memory, short memory, mean reversion (no long-run effects) or no mean reversion (no long-run equilibrium). Empirical analyses are conducted using data for the U.S., the U.K., and Australia. The results show that financial and real estate factors generally outperform economic variables in forecasting securitized real estate returns. Long memory (long-range dependence) is generally found between securitized real estate returns and stocks, bonds, and direct real estate returns, while only short memory is found between securitized real estate returns and the economic variables. Such results imply that to forecast securitized real estate returns, it may not be necessary to identify the economic variables that are related to changing economic trends and business conditions.
|Date of creation:||Mar 2009|
|Contact details of provider:|| Web page: http://www.SwissFinanceInstitute.ch|
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:chf:rpseri:rp0908. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marilyn Barja)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.