2,705 research outputs found

    Momentum Effects and Mean Reversion in Real Estate Securities

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    This article is the winner of the International Real Estate Investment/ Portfolio Management manuscript prize (sponsored by LaSalle Investment Management) presented at the American Real Estate Society Annual Meeting. This article tests for the presence of both price continuation and price reversals in international real estate securities. The results reveal evidence of performance persistence in international markets over short and medium term horizons, however the evidence on price reversals is less compelling. The empirical analysis tests for mean reversion using Variance Ratio and Augmented Dickey-Fuller tests. In neither case is there consistent evidence of mean reversion in international real estate securities. The portfolio switching tests do reveal some evidence of performance reversals. However, while under-performing markets do outperform over longer horizons, they do not do so at statistically significant levels.

    International Real Estate Diversification: Empirical Tests using Hedged Indices

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    This study examines the potential diversification opportunities arising from the extension of real estate portfolios into an international environment. Using data for ten countries, the article compares the diversification benefits obtained from both real estate securities and hedged indices. The hedged indices are constructed in line with the methodology proposed by Giliberto (1993) and are examined as a potential alternative proxy for the direct market. The results indicate that while benefits do arise from international diversification, the results tend to be statistically significant only when local returns are used and no constraints are imposed on the optimal portfolios. In addition, there are concerns over the reliability of the mean return and correlation coefficients obtained using the hedged indices.

    Bayes-Stein Estimators and International Real Estate Asset Allocation

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    This article re-examines the issue of international diversification in real estate securities and attempts to address the problem of estimation error in the inputted parameters through the use of alternative techniques. The results see an increased stability in calculated portfolio allocations in comparison to the classical mean-variance tangency approach, and see significant improvements in out-of-sample performance. In addition, the minimum variance portfolio significantly outperforms a naive equally-weighted strategy. These results are also largely consistent when transaction costs are incorporated into the analysis.

    A Re-Examination of the Inflation-Hedging Ability of Real Estate Securities: Empirical Tests Using International Orthogonalized & Hedged Data

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    This study re-examines the relationship between real estate securities and inflation in a total of ten international markets. In addition to the raw data, both the orthogonalized and hedged approaches were adopted in order to strip out the general impact of the domestic equity market. The results revealed that there is minimal evidence of a positive relationship between real estate securities and inflation, which is in line with existing empirical evidence. However, the strong evidence of perverse relationship, noted in previous studies of REITs, is not robust throughout the other nine markets. The hedged and orthogonalized data also provided minimal evidence in favour of a positive relationship, both in the short and long terms.Inflation hedging, International real estate, real estate securities
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