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Ex-ante performance of REIT portfolios

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https://econpapers.repec.org/scripts/redir.pf?u=http%3A%2F%2Flink.springer.com%2F10.1007%2Fs11156-022-01068-6;h=repec:kap:rqfnac:v:59:y:2022:i:3:d:10.1007_s11156-022-01068-6
Time Added
2022/09/19 18:35
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Trading Strategies
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Authors
Gene Birz Erik Devos Sandip Dutta Khoa Nguyen and Desmond Tsang Gene Birz: Southern Connecticut State University Erik Devos: University of Texas at El Paso Sandip Dutta: Southern Connecticut State University Khoa Nguyen: Southern Connecticut State University Desmond Tsang: Chinese University of Hong Kong Business School
Abstract
Abstract The Real Estate Investment Trust (REIT) market has become an increasingly important vehicle for alternative investment for equity investors. While existing research examining the cross-section of REIT returns usually employs standard risk factors in the in-sample models it can only show the ex-post performance of REIT portfolios. The goal of our paper is to examine the ex-ante performance of REIT portfolios (i.e. the ability of investors to earn abnormal returns in real time). We employ the out-of-sample methodology of Cooper Gutierrez and Marcum (2005) and show that ex-ante performance of REIT portfolios is rather weak. For about half of our 19-year sample over the period of 1999 to 2017 the portfolio performances of REITs chosen ex-ante do not beat the performances of the FTSE-NAREIT or the CRSP Equal-Weighted index. After adjusting for transaction costs the REIT portfolios significantly further underperform their benchmarks. Overall our findings suggest that the market is relatively efficient in the REIT sector and it is difficult for investors to devise trading strategies that improve the ex-ante performance of REIT portfolios based on standard risk factors.
Keywords
REITs ; Real estate ; Predictability ; Abnormal returns ; Out-of-Sample ; Portfolio management (search for similar items in EconPapers)
Year Published
2022
Series
Review of Quantitative Finance and Accounting 2022 vol. 59 issue 3 No 6 995-1018
Rank
0.74
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