The Predictability of Equity REIT Returns: Time Variation and Economic Significance
Posted: 14 Dec 1999
This paper presents evidence on predictability of excess returns for equity REITs relative to the aggregate stock market, small capitalization stocks, and T-bills using best fit models from prior time periods. We find that excess equity REIT returns are far less predictable out-of-sample than in-sample. This inability to forecast out-of-sample is particularly true in the 1990s. Nevertheless, in the absence of transaction costs, active trading strategies based on out-of-sample predictions modestly outperfr om REIT buy-and-hold strategies. However, when transaction costs are introduced, profits from these active trading strategies largely disappear.
JEL Classification: G12
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