REIT-Based Property Return Indices: A New Way to Track and Trade Commercial Real Estate
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Geltner_REIT-based Property.pdf
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241.56 KB
Format
Adobe PDF
Checksum (MD5)
12e0ecaea40d40c9e2b3ee4722bac770
Author(s)
Horrigan, Holly
Case, Brad
Geltner, David M.
Pollakowski, Henry
Date Issued
2009
Journal
Journal of Portfolio Management
Publisher
Institutional Investor
Citation
Horrigan, Holly et al. “REIT-Based Property Return Indices: A New Way to Track and Trade Commercial Real Estate.” The Journal of Portfolio Management 35.5 (2009): 80-91.
Version
Author's final manuscript
Abstract
Using REIT return data, bond data, and property holding data, the authors construct property market segment-specific indices of asset returns. The authors show that these pure-play indices can be employed to make pure, targeted investments in the commercial real estate market while retaining the liquidity, transparency, and pricing efficiency benefits of the well-developed public market in REITs. These pure-play indices compare favorably with existing property market return indices, displaying volatilities similar to transaction-based indices, such as the Moody’s/REAL Commercial Property Price Index, but tending to lead the private market in time. The pure-play indices can be generated at a daily frequency without significant noise and at various levels of market segment granularity and, notably, have led the transactions-based direct property market indices during the recent market downturn. The authors’ findings suggest that the REIT-based pure-play indices may provide a unique, new information source about the commercial property market, as well as a unique capability to facilitate targeted investments, construct hedges, and potentially support derivatives trading.
MIT Department
Massachusetts Institute of Technology. Center for Real Estate
Massachusetts Institute of Technology. Department of Urban Studies and Planning
Terms of Use
Attribution-Noncommercial-Share Alike 3.0 Unported
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DOI of Published Version
http://dx.doi.org/10.3905/JPM.2009.35.5.080
