BUSI 422 Read & Interact Brueggeman & Fisher Chapter 22 solutions complete answers

BUSI 422 Read & Interact Brueggeman & Fisher Chapter 22 solutions complete answers

 

Two series are said to be highly correlated when the coefficient of correlation approaches:

 

_____ provide a measure of risk-free return.

 

The potential for risk reduction is greatest as the coefficient of correlation approaches:

 

  is often calculated relative to a benchmark such as the S&P 500 or the NCREIF Property Index (NPI) or some combination of the two.

 

What do the differences in the performance of real estate in different global cities suggest?

 

_______ are more risky than the NCREIF Index.

 

If the returns of two securities tends to move in the same direction during a particular time period, they are said to have a ______ covariance.

 

Indexes measuring the   returns for commercial real estate are being developed in other countries, allowing investors to have a benchmark for the performance of real estate in those countries like we have with the NCREIF index in the United States. 

 

The NCREIF Index may not fully capture the true variability in returns for private real estate because it is based on   values rather than transaction prices.

 

If an asset is producing returns that move in a pattern very similar to movements in a portfolio's returns, the inclusion of that asset in the portfolio is:

 

  REITS operate by buying real estate and acquiring mortgages on both commercial and residential real estate.

 

True or false: Publicly traded REITs have similar variance when compared to private real estate investment as long as the underlying properties are similar.

 

Suppose you want to invest in real estate without having to purchase properties directly. You purchase a derivative that has a return based on the NCREIF Property Index. You have taken a _____ position in the index.

 

Over time, investments with greater risk are likely to exhibit more   in returns than investments with fewer of these risks.

 

Because of the numerous risks involved in global investing, investors often do which of the following?

 

The standard deviation of the NAREIT Index is higher than that of the NCREIF Index. This could be due to the fact that when real estate is owned by publicly traded REITs, it takes on more of the   of public markets in general.

 

True or false: Investors make decisions based on expected risks and returns.

 

The coefficient of   is a relative measure of the extent to which one dataset moves in relation to another dataset.

 

To determine optimal security weighting in a portfolio, ____ combinations of assets must be considered.

 

The _____ is calculated by finding the nth root of the product of each quarterly holding period return in a series multiplied together, minus 1.

 

Suppose you have calculated the following historic return correlations between investments:EREITS and common stocks (0.8219)EREITS and bonds (0.1624)EREITS and T-bills (0.0562)This suggests that adding real estate investments to a portfolio containing common stock, bonds and T-bills:

 

Investors that invest in riskier properties should expect to earn a higher investment return than they would on a less risky investment. The difference in returns is known as:

 

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 is:

 

Suppose you want to determine how much return an investor could expect to earn relative to the total risk taken if an investment is made. What statistical measure would you use for this?

 

Greater variability in market prices and cash flows can be thought of as commensurate with:

 

Investing in a(n) _____ REIT may be less risky than investing directly in real estate.

 

Data on financial assets ______ real estate.

 

Which of the following property types is not included in the NCREIF Index?

 

True or false: Similar to securities markets, there is a centralized collection of real estate transactions and operating income data available.

 

Which of the following statistics ranges between -1 and +1?

 

Select all that apply. The standard deviation of returns divided by the mean return is known as:

 

The NCREIF Index may not fully capture the true variability in return for private real estate because it is based on         values rather than        prices.

 

Match the type of risk to its description.

 

The        index is a monthly index based on ending market prices for shares owned by REIT investors. Fill in the blank using the acronym for the index.

 

True or false: Arithmetic mean returns are simple compounded averages.

 

Global investing carries its own set of unique risks not seen in domestic investment. Which of the following are examples of this risk? Select all that apply.

 

Match the investment data source to the correct description.

 

The NCREIF Index has a higher correlation with the CPI, indicating that it may be a        inflation hedge than REITs.

 

Overtime, investments with greater risk are likely to exhibit more       in return than investments with fewer of these risks.

 

Which of the following are reasons that there has been increasing interest among investors to invest on a global basis? Select all that apply.

 

True or false: The standard deviation of portfolio returns is equal to the simple weighted average of the individual standard deviations of the indexes.

 

Select all that apply. An investor owns mostly office space and very little industrial real estate. The investor believes they are overexposed and want to reduce their risk, but don’t want to sell or buy anymore real estate. They could:

 

       returns include the effects of leverage, while the        index does not. Answer using the appropriate acronyms.

 

The NCREIF Property Index measures the        performance of income-producing properties.

 

       correlation with inflation is desirable because it indicates that the asset is an inflation hedge.

 

When investing in a(n)        REIT, an investor is buying equity shares in an entity whose assets are primarily       .

 

Select all that apply. One must be careful when making generalizations about real estate performance because:

 

        shares benefit if the NCREIF Index goes up in value more than expected while        shares benefit if the NCREIF Index goes down in value more than expected.

 

Any new asset that is being considered as an addition to a portfolio should be judged on the grounds of       .

 

True or false: An investor entered into an agreement to swap office returns for retail returns. The investor is taking the risk of the returns on real estate as reflected by the NCREIF Index.

 

Real returns are realized when        exceed the       .

 

The        is the portion of the curve showing the relationship between portfolio return and portfolio standard deviation that is positively sloping.

 

The purpose of calculating correlation coefficients is to consider how various        might be combined efficiently with various other assets when building a portfolio.

 

       allow investors to take a position in real estate or hedge a position without actually buying or selling properties.

 

       REITS operate by buying real estate and acquiring mortgages on both commercial and residential real estate.

 

True or false: When analyzing investments, returns data is all that is needed for analysis.

 

Investors want to invest in properties that are not correlated with each other in order to reduce portfolio risk. This is often done by which of the following?

 

Investors that invest in riskier properties should expect to earn a higher investment return than they would on a less risky investment. The difference in return is known as:

 

The data incorporated in the NCREIF Index is based on the performance of properties managed by the:

 

T-bills are generally used to represent a        investment.

 

There is always a better combination of securities that will increase returns for a given level of risk when return are        the efficient frontier.

 

Suppose you are planning to invest in up shares and down shares. You believe that property values are likely to decrease. You should purchase a(n):

 

An asset is added to a portfolio that will increase expected portfolio returns while maintaining portfolio risk. The asset is said to be:

 

The        contains the coefficient of correlation for returns on all securities being examined.