The long-run dynamics between direct and securitized real estate

Martin Edward Ralph Hoesli, E. Oikarinen, C. Serrano

Research output: Contribution to journalArticlepeer-review

72 Citations (Scopus)


This study presents evidence of cointegration between securitized (NAREIT) and direct (NCREIF) real estate total return indices. Since the two real estate indices are cointegrated with one another but not with the stock market, real estate investment trusts (REITs) and direct real estate are likely to have similar long-term diversification benefits in a stock portfolio. Only direct real estate is found to currently adjust towards the cointegrating relation, with NAREIT returns leading NCREIF returns. However, the results show evidence of the predictability of NAREIT returns during the 1980s. Additionally, a large and long-lasting deviation from the long-run relation between NAREIT and NCREIF is identified at the beginning of the "new REIT era."

Original languageEnglish
Pages (from-to)73-103
Number of pages35
JournalJournal of Real Estate Research
Issue number1
Publication statusPublished - 2011


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