Public versus Private Real Estate Equities: A Risk-Return Comparison

This paper compares public and private real estate equities. In so doing, we control for three of the main differences between these investment alternatives: property-type mix, leverage and appraisal smoothing. Given our data constraints, we restated the NAREIT index (for the period 1981-2001) to exclude non-core property types. In so doing, returns increased by nearly 100 basis points. We then delevered the REIT series. This restatement dramatically altered the risk/return characteristics: the return decreased by approximately 240 basis points and risk decreased by approximately 550 basis points. We then restated the NCREIF index so that it had the same weightings of core property types as the reconstituted NAREIT index. This restatement resulted in an enhancement of both NCREIF