Authors: Gerald W. Buetow, Jr., and Robert R. Johnson

Start Page: 215
End Page:224
Volume: 7
Issue Number: 3
Year: 2001
Publication: Journal of Real Estate Portfolio Management

Abstract: Previous research establishes that Federal Reserve monetary policy influences both stock and bond returns. This research extends past research and shows that similar patterns exist for real estate investment trust returns. We find that the correlation structure of asset returns changes with alternative monetary policy environments. Mean-variance analysis indicates that optimal asset allocations differ dramatically in different monetary policy environments, and that the
exposure to real estate should be prominent only in expansive environments. Overall, the findings suggest that investors may wish to realign their portfolios in reaction to, or anticipation of, Federal Reserve actions.