NAREIT and NAREIT Hedged

Can anyone explain how both are different?

NAREIT = Index of REIT NAREIT Hedged = NAREIT - without the equity market component

NAREIT Hedged simply purges NAREIT of its “equity component” REITs are publicly traded, indirect real estate investments. As a result, returns on a REIT are not always reflective of or entirely explained by, the underlying real estate. Rather, the REIT, being publicly traded on an exchange, contains an idiosyncratc equity component in its returns. I think the end result is that the NAREIT Hedged has a lower correlation with equity markets (e.g. S&P 500) and is more reflective of the underlying real estate return.

Awesome BHill, thanks.

This kind of post really freaks me out. I have never even HEARD of NAREIT Hedged.

Me neither before writing a CFA Sample exam and came to know…:wink:

good to know. V5, P18.

file this under questions i would love to see on the exam instead of reverse cash and carry arbitrage.