In the real estate chapter, why do we say that appraisal lag tends to smooth the index, reduce volatility and result in lower correlation with other asset?
Thanks
its not instant like a stock market quote. its also subjective to the guy appraising it.
i am not sure if your reply answered my question. I still didnt understand why would an appaisal lag smooth the index, reduce volatilty and result in lower correlation with other asset
Real estate is quoted when they are appraised. You don’t appraise every second the way you do it with the stock market so it will usually have a smoother Averaged price movement. Hence a lower volatility. It will have a smaller correlation because it isn’t being tracked properly compared to other assets. With that said the guy appraising your property could also be taking the average of other real estate, hence that too will make it have a smoother return. Hope this helps.
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it does now.
Thank you 