RT Journal Article
SR Electronic
T1 Searching for a Common Factor in Public and Private Real Estate Returns
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 120
OP 133
DO 10.3905/jpm.2013.39.5.120
VO 39
IS 5
A1 Andrew Ang
A1 Neil Nabar
A1 Samuel J. Wald
YR 2013
UL https://pm-research.com/content/39/5/120.abstract
AB We introduce a methodology to estimate common real estate returns and cycles across public and private real estate markets. We first place REIT indices and direct real estate—NCREIF appraisal-based and transaction-based indices (NPI and NTBI)—on a comparable basis by adjusting for leverage and sector. We extract a common real estate factor, which is allowed to be persistent, from all these markets. Individual real estate indices load on this common factor and they also are driven by persistent, idiosyncratic shocks. The common real estate factor is procyclical and has low correlations with standard systematic factors from public markets. Short-run idiosyncratic deviations from the common real estate factor load on several capital market factors for REITs and on liquidity factors for direct real estate.TOPICS: Real estate, commodities, statistical methods