Private and Public Real Estate - What's the Link? (May 2010)

16 Pages Posted: 14 Nov 2010  

Date Written: June 10, 2010

Abstract

In this paper, we study the relationship between private and public real estate in the US and UK markets. We demonstrate a strong link between public and private real estate returns in each of these markets. To uncover these relationships, we correct for appraisal smoothing and properly account for the lead-lag relationship between public and private returns. We find that public returns lead private returns, even after removing appraisal smoothing in private returns. We also discuss how real estate risk changes over longer horizons. In particular, our results suggest that private and public returns become more correlated at longer investment horizons. This carries important implications for risk management and strategic asset allocation.

Keywords: Private Public Real Estate US UK markets link returns appraisal lead-lag relationship between public private returns correlated longer investment horizons risk management strategic asset allocation

Suggested Citation

Suryanarayanan, Raghu and Stefek, Dan, Private and Public Real Estate - What's the Link? (May 2010) (June 10, 2010). MSCI Barra Research Paper No. 2010-21. Available at SSRN: https://ssrn.com/abstract=1707500 or http://dx.doi.org/10.2139/ssrn.1707500

Raghu Suryanarayanan (Contact Author)

MSCI Inc. ( email )

88 Pine Street
2nd Floor
New York, NY 10005
United States

Dan Stefek

MSCI Inc. ( email )

88 Pine Street
2nd Floor
New York, NY 10005
United States

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