Looking at the table on Page 17, Volume 5, it shows historical performance of the various real estate benchmarks, the S&P 500 and the GSCI. My question is: Why is the correlation between NAREIT and NCREIF (unsmoothed) so low? (0.21 from 1990-2004).
I would have guessed it would have been higher considering the assets underlying REITs and CREIFs are the same.
Just read the next couple pages and it only says, the following: “The correlations between NAREIT and NECREIF are low, suggesting that securitized real estate investment is a poor substitute for direct investment.”
I don’t expect an understanding of this to garner any additional points on the test day; it’s merely out of curiousity.
REITs are more correlated and follow small cap equities more closely than real estate.
Thanks!