Global Securitized Real Estate Benchmarks and Performance

Abstract

Choosing an appropriate benchmark is not unproblematic for academics or practitioners. Index construction methodologies vary from index to index as tradeoffs are made between the breadth of market coverage and the investability of the securities in the index. This paper examines the nuances between the most commonly used global securitized real estate benchmarks. A comparison of their construction methodologies, returns, and risk is performed, and the correlations between the various benchmarks are assessed. The composition of global securitized real estate markets is also analyzed. We conclude that the GPR General Property Share Index and the S&P/Citigroup World Property Index are more appropriate to examine the performance of the market as a whole, while the GPR 250 Property Share Index and the FTSE EPRA/NAREIT Global Real Estate Index are better suited to evaluate portfolio performance.

Public Real Estate and the Term Structure of Interest Rates: A Cross-Country Study

“…The results appear to be robust and are not dependent on the choice of index provider. These findings support those of Serrano & Hoesli (2009) who report high average correlations between the main providers of listed real estate indices. Serrano & Hoesli (2009) examined the 1990 to 2007 period and examined indices produced by FTSE/EPRA NAREIT, Thomson Reuters Datastream, GPR and S&P/Citigroup.…”

Are securitised real estate markets efficient?

“…Again, these results are similar to those presented in shown not to be efficient. These six markets are known to be the most liquid 8 , globalised and with better standards of regulation that ensure a more transparent functioning of the market, when compared to the other eight markets (Serrano and Hoesli, 2009;Bardhan and Kroll, 2007). Hence, it appears that real estate markets, in line with Schindler et al (2011), are relatively less efficient as compared to stock and bond markets in general which could be a reflection of the nature of real estate.…”

“…6 . Among the available real estate, the GPR index is considered as the most appropriate to examine the performance of the real estate market as it has the largest coverage in terms of market capitalisation (Serrano and Hoesli, 2009). The GPR index is a value-weighted index used to represent monthly price changes of the real estate stocks in the world.…”

“…The assignment is based on the principle that a company derives at least 60% of its operational turnover from a specific property sector. (See Serrano and Hoesli (2009) for a more detailed description of the index).…”

“…The scale of research on this issue in the real estate markets, however, is still much less as compared to those in other markets (Schindler, Rottke and Füss (2010) and Schindler (2011)). Furthermore, the research on efficiency in this market has yielded mixed results depending on the specific real estate markets and time period covered and methodology used (Schindler (2011); Schindler et al (2010) and Serrano and Hoesli (2009)). Thus, there is a need for further research on market efficiency in the real estate market.…”