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Welcome to the 2018 AFS Annual Meeting, being held this year, in conjunction with FPA in Chicago!
Wednesday, October 3 • 2:00pm - 3:00pm
H3b - Predicting REIT Factor Loadings and Structural Alphas from Capital Market Assumptions

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Prior research has analyzed the predictability of securitized real estate returns using economic variables, financial factors, and real estate factors. Additionally, scholars contend that an underlying real estate factor exists that explains both securitized and direct real estate returns. We detail how to extract factor risk, return, and correlation assumptions from a set of asset-class risk, return and correlation assumptions. Such capital market assumptions are key tools in the operations of the financial markets. Using a third-party set of such asset-class assumptions, we then implement the extraction technique to demonstrate how to evaluate the implied factor loadings on future REIT returns. Some of these factors are based on economic variable assumptions while others are based on real estate and financial factors. Additionally, we can apply our technique to evaluating other specialized real estate investments including value-added, opportunistic, and region-specific vehicles. Our analysis contributes to the real estate return literature and offers useful insight to the veracity of these important inputs to investment decision making and portfolio construction.

Author(s): Brian C. Payne, William W. Jennings

Presenters
avatar for William Jennings

William Jennings

Professor of Finance and Investments, USAF Academy
William W. Jennings is Professor of Finance and Investments at the U.S. Air Force Academy, where he is the principal finance educator and a senior civilian management professor. He serves the community via various investment committees with over $35 billion in AUM—including at Air... Read More →


Wednesday October 3, 2018 2:00pm - 3:00pm
Michigan 1C

Attendees (1)