Performance Evaluation of Finite-Life Real Estate Investment Trusts

Abstract

This study analyzes the investment performance of real estate investment trusts, comparing the finite-life trusts (FREIT) with traditional REITs and stock returns. The results indicate that the FREITs performed more poorly than the REITs, with both the FREITs and REITs underperforming the market index over the period studied. It was also found that while portfolio risk diversification benefits may exist for the REITs and FREITs, it is not clear that the reduced risk is warranted by the large reduction in returns. Finally, this research shows that little total or unanticipated inflation hedging capability exists for the REITs or FREITs over the period studied, although anticipated inflation hedging capabilities were found.