Historic Returns and Institutional Real Estate Portfolios

Miles, Michael V.; McCue, Tom

doi:10.1111/j.1540-6288.1981.tb01698.x

Cited by 3 publications

(2 citation statements)

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“…They find that diversification increases both property‐level cash flows and general and administrative expenses; additionally, they report that property‐type diversification increases borrowing costs and decreases liquidity, presumably due to less transparency for more diversified REITs. The finding of increased property‐level cash flows due to property‐type diversification supports a similar finding from Miles and McCue (1982), which focused mainly on a comparison of REITs and commingled real estate funds.…”

Section: Literature Reviewsupporting

confidence: 82%

Performance differences in property‐type diversified versus specialized real estate investment trusts (REITs)

Benefield

Anderson²,

Zumpano

2008

Rev Financ Econ

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Evidence from the corporate finance literature indicates that diversified firms trade at a discount to otherwise comparable specialized firms. However, very little research has addressed whether a similar diversification discount might exist in equity REITs that diversify across property types relative to those specializing in one property type. Using a sample of 75 equity REITs, the existence of a property‐type diversification discount is tested using standard Jensen's Alpha, Treynor Index, and Sharpe Ratio performance ranking methodologies over four commonly employed market proxies. Several variations of these standard tests are also utilized as robustness checks.

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Section: Literature Reviewsupporting

confidence: 82%

Performance differences in property‐type diversified versus specialized real estate investment trusts (REITs)

Benefield

Anderson²,

Zumpano

2008

Rev Financ Econ

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“…A casual analysis of real estate investment trust and commingled real estate fund portfolios seems to reveal several different patterns of diversification. Miles and McCue (1982) show that there are portfolios where the component properties are of different types but are limited to a single geographic region. It is also not uncommon to see portfolios of a single property type but geographically quite diverse.…”

Section: Relevant Researchmentioning

confidence: 99%

Diversification in the Real Estate Portfolio

Miles

McCue

1984

J of Financial Research

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This study investigates primarily the relationship between portfolio size and the reduction of return variation in real estate portfolios and attempts to provide some notion of what represents an "adequate" level of naive diversification. The study also examines the proportional components of the total risk in real estate investment. The results provide information on the relative percentage of total risk accounted for by systematic or "market" factors.

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Owner-occupied homes, income-producing properties, and REITs as inflation hedges: Empirical findings

Gyourko

Linneman

1988

J Real Estate Finan Econ

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New evidence on the correlation patterns of various real estate returns with inflation is presented. Returns on a wide array of real estate, nonresidential as well as residential, are investigated. Stock and bond returns are also analyzed for comparison purposes. Extensive heterogeneity is found in real estate return correlations with inflation. Nonresidential property returns are most strongly positively correlated with inflation, although the appreciation in owner-occupied homes is also positively associated with inflation. However, REIT returns tend to be strongly negatively correlated with inflation. In this respect, they look more like traditional stocks and bonds than any other type of real estate. Finally, new evidence on return correlations with energy prices is also presented. Nonresidential real estate performs best here, too, although no real estate asset fully compensates investors for adverse energy price shocks.This paper presents new evidence on the correlation of the returns on a wide variety of assets with both expected and unexpected inflation. An unusually extensive array of residential and nonresidential real estate returns are analyzed. Other than a few studies of specific comingled real estate funds (CREFs), ~ nonresidential returns largely have been ignored. We analyze the return series for four categories of real estate investment trusts (REITs): total, mortgage, equity, and hybrid, along with the Frank Russell Company (FRC) and Prudential Property Investment Separate Account (PRISA) income-producing property indexes in our study. Different sources of price information on owner-occupied real estate are also examined. The correlations with inflation of the returns on stocks, bonds, and Treasury obligations are also investigated.It is important to note that we examine inflation-hedging abilities with respect to a measure of inflation different from that which is typically used. The standard measure employed in previous studies is the percentage change in the Consumer

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Historic Returns and Institutional Real Estate Portfolios

Cited by 3 publications

References 0 publications

Performance differences in property‐type diversified versus specialized real estate investment trusts (REITs)

Performance differences in property‐type diversified versus specialized real estate investment trusts (REITs)

Diversification in the Real Estate Portfolio

Owner-occupied homes, income-producing properties, and REITs as inflation hedges: Empirical findings

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