The Information Content of Real Estate Derivative Prices

The objective of this research was to assess whether forward returns implied by real estate derivative prices provide a more accurate measure of future real estate returns than a consensus forecast of industry experts. Implied returns derived from real estate derivative prices are often used by indu...

Full description

Saved in:
Bibliographic Details
Published in:Journal of portfolio management 2011, Vol.37 (5), p.170-181
Main Authors: Bond, Shaun A., Mitchell, Paul
Format: Article
Language:English
Subjects:
Arbitrage
Commercial real estate
Derivatives
Estimates
Institutional investments
Investment advisors
Investors
Prices
Rates of return
REITs
Risk premiums
Structured notes
Studies
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:The objective of this research was to assess whether forward returns implied by real estate derivative prices provide a more accurate measure of future real estate returns than a consensus forecast of industry experts. Implied returns derived from real estate derivative prices are often used by industry participants as forecasts of future returns, even though the theoretical justification for this is limited. Bond and Mitchell's analysis suggests that since the introduction of real estate derivatives in the U.K., real estate derivatives prices have provided a better indication of future returns than a consensus forecast. But most of this apparent superior performance can be attributed to publication delays with the consensus forecasts. When adjusted for publication delay, the information content of real estate derivatives is shown to be remarkably similar to the consensus forecasts. The authors also caution that as the market for real estate derivatives develops, a greater divergence may emerge between market forecasts and real estate derivatives prices. [PUBLICATION ABSTRACT]
ISSN:0095-4918
2168-8656
DOI:10.3905/jpm.2011.37.5.170