PHYSICS 102 Lecture Notes - Lecture 10: Active Management, Capital Asset Pricing Model, Real Estate Investment Trust
Document Summary
Real estate investment principles: market fundamentals and active management. Fundamentals 1) property is an important asset class position in capital market matrix. Share in investable capital market: 36% of us$ 40 trillion 1/3 of investment. Big asset class (capm rationale: distinct return/risk profile. In between stocks and bonds it makes sense: capital vs dividend return (rent) very predictable cash flow- you know your rent 5 years forward, looks like a bond. But value of re can go up and down that looks more like a stock. Big diversification opportunities: correlations low & negative with stocks bonds and bills housing best diversif. Value your property: valuators (& biases) not so reliable, while for bonds and stocks you have way better valuations. Look at market portfolio: capm re 36%, do this as well. Still overallocation in the portfolio you need to consider overall allocation for each investors! Re owner vs non-owner: asset liability management (alm) hard for property investments.
