Predictability of Equity REIT Returns: Implications for Property Tactical Asset Allocation
24 Pages Posted: 29 Sep 2000
Date Written: August 2004
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: Suggested Citation