A1 Refereed original research article in a scientific journal
The Long-Run Dynamics between Direct and Securitized Real Estate
Authors: Oikarinen E, Hoesli M, Serrano C
Publisher: AMER REAL ESTATE SOC
Publication year: 2011
Journal: Journal of Real Estate Research
Journal name in source: JOURNAL OF REAL ESTATE RESEARCH
Journal acronym: J REAL ESTATE RES
Number in series: 1
Volume: 33
Issue: 1
First page : 73
Last page: 103
Number of pages: 31
ISSN: 0896-5803
Abstract
This study presents evidence of cointegration between securitized (NAREIT) and direct (NCREIF) real estate total return indices. Since the two real estate indices are cointegrated with one another but not with the stock market, real estate investment trusts (REITs) and direct real estate are likely to have similar long-term diversification benefits in a stock portfolio. Only direct real estate is found to currently adjust towards the cointegrating relation, with NAREIT returns leading NCREIF returns. However, the results show evidence of the predictability of NAREIT returns during the 1980s. Additionally, a large and long-lasting deviation from the long-run relation between NAREIT and NCREIF is identified at the beginning of the "new REIT era."
This study presents evidence of cointegration between securitized (NAREIT) and direct (NCREIF) real estate total return indices. Since the two real estate indices are cointegrated with one another but not with the stock market, real estate investment trusts (REITs) and direct real estate are likely to have similar long-term diversification benefits in a stock portfolio. Only direct real estate is found to currently adjust towards the cointegrating relation, with NAREIT returns leading NCREIF returns. However, the results show evidence of the predictability of NAREIT returns during the 1980s. Additionally, a large and long-lasting deviation from the long-run relation between NAREIT and NCREIF is identified at the beginning of the "new REIT era."
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