32: Real Estate

Question 1

REITS

*Highly liquid (trade on stock exchange)
*Tax advantaged
*Higher yield (current income)

Answer 1

REOC
*Highly liquid (trade on stock exchange)
*Taxable (not tax advantaged)
*Reinvest CF (reliant on capital appreciation)

Question 2

Real Estate Indicies are categorized as:

Answer 2

• Transaction based
• Appraisal based

Question 3

Appraisal based indicies:
* Use:
* Measures:
* vs transaction based
* volatility
* correlation

Answer 3

• Use: valuation information from individual properties
• Measures: market movements
• lag transaction based
• lower volatility (vs othe asset classes)
• lower correlation (w/ other asset classses)

Question 4

Transaction based indicies:
* Use:

Answer 4

• Use: statistical techniques (introduces noise to index)

Question 5

The impacts of Appraisal lag include:

Appraisal lag results from sudden shifts in the market

Answer 5

• Smoothes the index
• lowers volatility
• behaves like a moving average
• overstates Sharpe ratio (appropriate allocation is overstated)