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REIT Mimicking Portfolio Analysis

Author

Listed:
  • Kevin C.H. Chiang

    (College of Business Administration, Northern Arizona University, Flagstaff, AZ 86011, USA)

  • Kirill Kozhevnikov

    (Lundquist College of Business, University of Oregon, Eugene, OR 97403, USA)

  • Ming-Long Lee

    (Department of Finance, National Yulin University of Science and Technology, Touliu, Yulin, Taiwan)

  • Craig H. Wisen

    (School of Management, University of Alaska Fairbanks, Fairbanks, AK 99775, USA)

Abstract

It is well known that expected returns vary by industry (Lyon et al., 1999), and that REIT-based mimicking portfolios may capture the information in real estate investment trust (REIT) prices (Downs, 2000). This study performs REIT-based mimicking portfolio analysis. The results indicate that when the Capital Asset Pricing Model and the Fama-French (1993) three- factor model are used to evaluate the performance of a REIT portfolio, the probability for making Type I error exceeds its significance level. Performance tests are better specified when mimicking portfolios are constructed with the firms from the REIT industry. In addition, the market beta of REIT portfolios appears to converge to the market beta of the NCREIF Index when REIT-based mimicking portfolios are included into the specification. The result is consistent with the notion that there is a strong linkage between REIT returns and the underlying real estate factor (Ziering et al., 1997).

Suggested Citation

  • Kevin C.H. Chiang & Kirill Kozhevnikov & Ming-Long Lee & Craig H. Wisen, 2006. "REIT Mimicking Portfolio Analysis," International Real Estate Review, Global Social Science Institute, vol. 9(1), pages 95-111.
    • Handle: RePEc:ire:issued:v:09:n:01:2006:p:95-111
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    References listed on IDEAS

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    Cited by:

    1. Sara Kelly Anzinger & Chinmoy Ghosh & Milena Petrova, 2017. "The Other Side of Value: The Effect of Quality on Price and Return in Real Estate," The Journal of Real Estate Finance and Economics, Springer, vol. 54(3), pages 429-457, April.
    2. Massimo Mariani & Paola Amoruso & Alessandra Caragnano & Marianna Zito, 2018. "Green Real Estate: Does It Create Value? Financial and Sustainability Analysis on European Green REITs," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(7), pages 1-80, June.
    3. Bradford Case & Yawei Yang & Yildiray Yildirim, 2012. "Dynamic Correlations Among Asset Classes: REIT and Stock Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 44(3), pages 298-318, April.

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    More about this item

    Keywords

    REIT; mimicking portfolio; performance evaluation;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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