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| Apartment REITs and Apartment Real
Estate Author: Youguo Liang, Arjun Chatrath, and Willard McIntosh Start Page: 277 Abstract: This study employs a
"hedged" apartment REIT index to track the performance of apartment real estate
and to assess the performance of apartments in efficient mixed-asset portfolios consisting
of stocks, bonds and real estate. The hedged apartment index reflects the returns of
apartment REITs after the effects of equity REITs and the stock market are removed from
the apartment REIT returns. It is demonstrated that the hedged apartment REIT index
captures a substantial amount of the volatility unique to apartment real estate.
Furthermore, the hedged apartment REIT index does not suffer from the appraisal-smoothing
problem and the apparent seasonality of appraisal-based indices, such as the
Russell-NCREIF apartment index. Therefore, it would appear that the hedged apartment REIT
index can be employed as a proxy for apartment real estate in portfolio allocation
decisions. This study provides evidence that apartment real estate should be a candidate
for some efficient mixed-asset portfolios. |
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