Articles:
REIT Mimicking Portfolio Analysis
Authors:
Kevin C.H. Chiang, Kirill Kozhevnikov,
Ming-Long Lee and Craig H. Wisen
Start Page: 95
End Page: 111
Volume: 9
Issue Number: 1
Year: 2006
Publication: International Real Estate Review
Abstract: It is well known
that expected returns vary by industry (Lyon et al., 1999), and that REIT-based
mimicking portfolios may capture the information in real estate investment
trust (REIT) prices (Downs, 2000). This study performs REIT-based mimicking
portfolio analysis. The results indicate that when the Capital Asset Pricing
Model and the Fama-French (1993) three-factor model are used to evaluate the
performance of a REIT portfolio, the probability for making Type I error
exceeds its significance level. Performance tests are better specified when
mimicking portfolios are constructed with the firms from the REIT industry.
In addition, the market beta of REIT portfolios appears to converge to the
market beta of the NCREIF Index when REIT-based mimicking portfolios are
included into the specification. The result is consistent with the notion
that there is a strong linkage between REIT returns and the underlying real
estate factor (Ziering et al., 1997).
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