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| Risk Characteristics of Real Estate
Related Securities—An Extension of Liu and Mei (1992) Author: Hsien-hsing Liao and Jianping Mei Start Page: 279 Abstract: This study extends
from Liu and Mei (1992) by further investigation of assets, real estate related
securities, which includes both equity and mortgage real estate investment trusts (REITs),
the stocks of builder- and owner-companies, and mortgage-backed securities (MBSs). There
are five major findings. First, expected excess returns of real estate related securities
are more predictable than the expected excess returns of value-weighted stocks and bonds.
Second, right market timing is important to investors since evidence shows that the risk
premiums of real estate related securities vary substantially over time. Third, real
estate market conditions significantly influence bonds and MBSs. Fourth, MBSs are more
similar to bonds than mortgage REITs. In addition, returns on mortgage REITs resemble both
stocks and bonds. Finally, real estate stocks have a very high sensitivity toward stock
market portfolio. This suggests that real estate stocks are not good instruments to help
diversify stock risk. |
