Mar

25

I was glancing at the performance of the Vanguard family of funds today. Their REIT index fund is down about 26% YTD through March 23, 2009. According to Practical Speculation by our own Niederhoffer and Kenner there is a 50% correlation between REITs in one quarter and stocks in the next quarter. A quick eyeball check of the regression scatter plot in the book shows that this performance predicts something like a 12% move in stocks next quarter. Whether the move is up or down is left as an exercise for the reader. But pages 253-259 would be a good place to start.

Dr. McDonnell is the author of Optimal Portfolio Modeling, Wiley, 2008


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