Predictability of Equity REIT Returns: Implications for Property Tactical Asset Allocation

24 Pages Posted: 29 Sep 2000

See all articles by John Okunev

John Okunev

Bond University Business School

Patrick J. Wilson

University of Technology Sydney (UTS) - School of Finance and Economics

Date Written: August 2004

Abstract

This study presents further evidence on the predictability of excess Equity Reit returns. Recent evidence on forecasting excess returns using fundamental variables has resulted in poor out of sample performance. Trading strategies based upon these forecasts have not outperformed the buy hold strategy in the 1990's. We develop an alternative strategy which is based upon the time variation of investors risk premium. Our results indicate that a strategy based upon modeling this time variation of the risk premium is able to outperform the buy hold strategy both in and out of sample. By modeling the dynamic behavior of the risk premium we are implicitly capturing economic risk premiums which are not captured by conventional multi beta asset pricing models.

Keywords: property asset allocation

JEL Classification: G12

Suggested Citation

Okunev, John and Wilson, Patrick J., Predictability of Equity REIT Returns: Implications for Property Tactical Asset Allocation (August 2004). Available at SSRN: https://ssrn.com/abstract=241208 or http://dx.doi.org/10.2139/ssrn.241208

John Okunev (Contact Author)

Bond University Business School ( email )

Gold Coast
Australia

Patrick J. Wilson

University of Technology Sydney (UTS) - School of Finance and Economics ( email )

Haymarket
Sydney, NSW 2007
Australia
61 2 9514 7777 (Phone)
61 2 9514 7711 (Fax)

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