Term
| Available real estate data may NOT be representative of.... |
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Definition
- the many types of real estate
- the many geographic locations
- frequency of transactions
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Term
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Definition
| National Association of Real Estate Investment Trusts: monthly index based on ending market prices for shares owned by REIT investors |
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Term
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Definition
National Council of Real Estate Investment Fiduciaries:
measures the historic performance of income-producing properties quarterly and based on NOI and quarterly price change |
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Term
| What is the most fundamental unit of measure used by portfolio managers to measure investment returns for individual securities, or a class of securities in a portfolio? |
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Definition
| Holding Period Return (HPR) |
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Term
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Definition
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Term
| When will the arithmetic mean and the geometric mean differ greatly? |
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Definition
| if values in the series rise and fall sharply or the series is very long |
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Term
| What is the distinct conceptual difference between the arithmetic mean and geometric mean? |
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Definition
| The geometric mean is used by portfolio managers when considering the performance of an investment and is expressed as a compound rate of interest from the beginning to the end of a specific period of time..... arithmetic is only a simple average and used during very long periods of time |
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Term
| From 1985 to 2006 which security produced the highest returns? x |
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Definition
- Equity REIT
- S&P 500
- Corporate Bond
- NCREIF
- CPI
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Term
| What is considered the "price of risk"? |
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Definition
| premiums over what could be earned on a riskless investment |
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Term
| Coefficient of Variation x |
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Definition
| the standard deviation of returns divided by the mean return....risk to reward ratio and it is intended to relate total risk, as represented by the standard deviation, to the mean return with the idea of determining how much return an investor could expect to earn relative to the total risk taken if the investment was made |
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Term
| What does a coefficient of variation of 1.5 mean? x |
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Definition
| this may be interpreted as taking 1.5 units of risk for every unit of return that is earned |
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Term
| What has a better risk adjusted return? EREIT or NCREIF?...and why? x |
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Definition
NCREIF.....
- does not include leverage
- appraised values thus smoothed
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Term
| How should a new addition to a portfolio be judged? |
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Definition
| whether its addition to an existing portfolio will increase expected portfolio returns while maintaining, or lowering, portfolio risk....vice versa |
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Term
| The covariance between two assets is an... |
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Definition
absolute measure if the extent to which two data series move together over time
Positive-move together
Negative-move in opposite directions
...can be positive or negative infinity so it is hard to judge how well correlated |
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Term
| Coefficient of correlation x |
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Definition
used to obtain this relative measure or extent to which one set of numbers moves in the same or opposite direction with another series
+1 to -1 |
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Term
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Definition
| the most efficient combination of securities that provides investors with maximum portfolio returns as portfolio risk increases |
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Term
| EREITs are positively correlated with common stocks(.5338) and corporate bonds(.2922).....and a negative correlation with T-Bills(.0405)....What does this relationship suggest? |
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Definition
| because EREITs have less-than perfect correlation with the S&P 500 and corporate bonds and the correlation coefficient between both EREITs and T-bills is very low, there is a good change that if this real estate investment were combined with a portfolio, diversification could be achieved. |
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Term
| What statistical concept do many portfolio managers use to represent risk when considering investment performance? x |
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Definition
The standard deviation (square root of the variance) of returns is typically used as a measure of risk.
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Term
| What is the difference between covariance and correlation? Why are these concepts so important in portfolio analysis? x |
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Definition
Correlation is calculated by dividing the covariance of two returns by the product of the standard deviation of the two returns. Both measure the degree to which returns move together over time. The advantage of the correlation coefficient is that it always ranges from -1 to +1 which makes it easier to compare for different investment alternatives.
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