Abstract

http://ssrn.com/abstract=2158703
 
 

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Searching for a Common Factor in Public and Private Real Estate Returns


Andrew Ang


Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Neil Nabar


Fidelity Investments, Inc. - Fidelity Management & Research

Samuel Wald


Fidelity Investments, Inc. - Fidelity Management & Research

April 16, 2013


Abstract:     
We introduce a methodology to estimate common real estate returns and cycles across public and private real estate markets. We first place REIT indices and direct real estate — NCREIF appraisal-based and transaction-based indices (NPI and NTBI) — on a comparable basis by adjusting for leverage and sector. We extract a common real estate factor, which is allowed to be persistent, from all these markets. Individual real estate indices load on this common factor and they also are driven by persistent, idiosyncratic shocks. The common real estate factor is pro-cyclical and has low correlations with standard systematic factors from public markets. Short-run idiosyncratic deviations from the common real estate factor load on several capital market factors for REITs and on liquidity factors for direct real estate.

Number of Pages in PDF File: 27

Keywords: Real Estate, Direct Real Estate Investments, REITs

JEL Classification: G12

working papers series


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Date posted: October 12, 2012 ; Last revised: April 17, 2013

Suggested Citation

Ang, Andrew and Nabar, Neil and Wald, Samuel, Searching for a Common Factor in Public and Private Real Estate Returns (April 16, 2013). Available at SSRN: http://ssrn.com/abstract=2158703 or http://dx.doi.org/10.2139/ssrn.2158703

Contact Information

Andrew Ang
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Neil Nabar (Contact Author)
Fidelity Investments, Inc. - Fidelity Management & Research ( email )
82 Devonshire Street
Boston, MA 02109
United States
Samuel Wald
Fidelity Investments, Inc. - Fidelity Management & Research ( email )
82 Devonshire Street
Boston, MA 02109
United States
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