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Time-Series Properties and Diversification Benefits of REIT Returns

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  • Vinod Chandrashekaran

Abstract

This study examines the potential of real estate investment trusts (REITs) to improve the investment opportunity set available to investors in the United States in an ex ante (i.e., asset allocation) context. The findings show that conditioning on lagged REIT returns offers investors an improved method to predict volatilities and correlations of REITs with other asset classes. The ex ante benefits of the diversification of REITs are related to ex post performance using a dynamic asset allocation exercise with ex ante information. These portfolios, on average, involve substantial allocation to REITs and achieve mean-variance tradeoffs close to those attained by fixed-weight unconditional mean-variance efficient portfolios.

Suggested Citation

  • Vinod Chandrashekaran, 1999. "Time-Series Properties and Diversification Benefits of REIT Returns," Journal of Real Estate Research, Taylor & Francis Journals, vol. 17(1), pages 91-112, January.
    • Handle: RePEc:taf:rjerxx:v:17:y:1999:i:1:p:91-112
    DOI: 10.1080/10835547.1999.12090963
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    Cited by:

    1. Odusami, Babatunde O. & Akinsomi, Omokolade, 2024. "Diversifying and hedging REIT portfolios with cryptocurrencies: Evidence from global and regional REIT indices," International Review of Financial Analysis, Elsevier, vol. 94(C).

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