Risk and return in real estate

  • Stephen A. Ross
  • Randall C. Zisler
II. Portfolio Theory and Contingent Claims Models in Real Estate

Abstract

Basic information is provided on the returns and risks from 1978 through 1985 for unleveraged equity real estate compared with stocks and bonds. Data sources include the Russell-NCREIF index, the Evaluation Associates index, and the Goldman Sachs equity real estate investment trust index. Findings reveal that the aggregate return for the publicly traded equity real estate investment trust index in nearly twice that of the other real estate series, and more than twice that of the Standard & Poor index. The equity real estate investment trust is far more volatile than the other two real estate series. Neither the Goldman Sachs nor the other two indexes exactly measure the returns or risks on equity real estate. The volatility of the equity real estate investment trust leads it to overstate the risk of this investment category, while the other two indexes are not return indexes. Estimates from this study indicate that real estate risk lies plausibly midway between that of stocks and bonds, in the 9 percent to 13 percent range.

Keywords

Returns risk appraisal commercial property smoothing REIT 

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References

  1. Feldman, Robert A. “Measuring Leveraged Real Estate Equity Performance.” Goldman Sachs Real Estate Topical Paper, 1987.Google Scholar
  2. Ingersoll, Jonathan E. Jr. “A Theoretical and Empirical Investigation of the Dual Purpose Funds.” Journal of Financial Economics (1976): 83–123.Google Scholar
  3. Ross, Stephen A. and Zisler, Randall C. “Managing Real Estate Portfolios: Part 2: Risk and Return in Equity Real Estate.” Goldman Sachs Real Estate Research Report 1987a.Google Scholar
  4. Ross, Stephen A. and Zisler, Randall C. “Managing Real Estate Portfolios: Part 3: A Close Look at Equity Real Estate Risk.” Goldman Sachs Real Estate Research Report 1987b.Google Scholar
  5. Thompson, Rex. “The Information Content of Discounts and Premiums on Closed End Fund Shared.” Journal of Financial Economics (1978): 151–186.Google Scholar

Copyright information

© Kluwer Academic Publishers 1991

Authors and Affiliations

  • Stephen A. Ross
    • 1
  • Randall C. Zisler
    • 2
  1. 1.Yale School of ManagementYale UniversityNew HavenUSA
  2. 2.Russell-Zisler, Inc.PrincetonUSA

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