Does Valuation - Indifferent Indexing Work for the Real Estate Market?

Posted: 1 Feb 2010 Last revised: 28 Dec 2016

See all articles by Feifei Li

Feifei Li

Research Affiliates, LLC

Jason C. Hsu

Rayliant Global Advisors; Research Affiliates, LLC; University of California, Los Angeles - Anderson School of Business

Vitali Kalesnik

Research Affiliates LLC

Date Written: November 2, 2010

Abstract

In historical testing, valuation-indifferent indexing produces statistically significant and economically large outperformance relative to traditional capitalization-weighted indexes. This result has been found for both U.S. and global equity data, as well as U.S. corporate bonds and emerging market bonds. This article reports a research application of the valuation-indifferent indexing method to construct two indexes covering U.S. and international-listed real estate companies. The authors find that the valuation-indifferent real estate indexes outperform the corresponding cap-weighted benchmark indexes by 3.96% (U.S. market) and 2.9% (global ex-U.S. market) per year. This finding suggests that using a valuation-indifferent indexing strategy can significantly improve the performance of passive real estate investing.

Keywords: Real Estate, REITs, Fundamental Indexing, Valuation-Indifferent Indexing, Alternative Indexing

JEL Classification: G12, G14

Suggested Citation

Li, Feifei and Hsu, Jason C. and Kalesnik, Vitali, Does Valuation - Indifferent Indexing Work for the Real Estate Market? (November 2, 2010). Journal of Investing, Vol. 19, No. 3, pp. 72-79, Fall 2010. Available at SSRN: https://ssrn.com/abstract=1545926

Feifei Li (Contact Author)

Research Affiliates, LLC ( email )

620 Newport Center Dr
Ste 900
Newport Beach, CA 92660
United States
949-325-8753 (Phone)
949-325-8953 (Fax)

HOME PAGE: http://researchaffiliates.com/index.htm

Jason C. Hsu

Rayliant Global Advisors ( email )

Hong Kong

Research Affiliates, LLC ( email )

620 Newport Center Dr
Suite 900
Newport Beach, CA 92660
United States

HOME PAGE: http://www.jasonhsu.org

University of California, Los Angeles - Anderson School of Business

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Vitali Kalesnik

Research Affiliates LLC ( email )

620 Newport Center Dr
Ste 900
Newport Beach, CA 92660
United States
949-325-8717 (Phone)
949-325-8917 (Fax)

HOME PAGE: http://researchaffiliates.com/index.htm

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