Hedged REIT

[myriam2222]

I am going into a lot of details again…. but what does it mean when CFAI material states “hedged REIT return series have been purged of its overall equity market return component”?
And what is that supposed to help with?
Thanks

 

[cpk123]

REIT - is returns of companies that invest in real estate - indirectly. That returns of the companies forming the REIT return series - will thus have a high correlation with the stock market index. So that stock market return *underlying part* needs to be removed - to then reflect a true “Real estate” return.

 

[myriam2222]

Ok thanks, that’s what I thought but I did not find the explanation anywhere.
I am not sure how they actually know to which extent a return is due to a move on the stock market and to which extent it is a “true real estate return” though. But anyways, I’ll stick to the curriculum.