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The Predictability of Real Estate Returns and Market Timing

In: Asset Pricing

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  • JIANPING J. P. MEI

    (Department of Finance, Stern School of Business, New York University, New York, NY 10003, USA)

  • CROCKER H. LIU

    (Department of Finance, Stern School of Business, New York University, New York, NY 10003, USA)

Abstract

Recent evidence suggests that all asset returns are predictable to some extent with excess returns on real estate relatively easier to forecast. This raises the issue of whether we can successfully exploit this level of predictability using various market timing strategies to realize superior performance over a buy-and-hold strategy. We find that the level of predictability associated with real estate leads to moderate success in market timing, although this is not necessarily so for the other asset classes examined in general. Besides, real estate stocks typically have higher trading profits and higher mean risk-adjusted excess returns when compared to small stocks as well as large stocks and bonds, even though most real estate stocks are small stocks.

Suggested Citation

  • Jianping J. P. Mei & Crocker H. Liu, 2003. "The Predictability of Real Estate Returns and Market Timing," World Scientific Book Chapters, in: Jianping Mei & Hsien-Hsing Liao (ed.), Asset Pricing, chapter 3, pages 47-75, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812795618_0003
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