TY - JOUR T1 - On the Tracking Performance and Return Deviation<br/>of Real Estate Leveraged ETFs JF - The Journal of Alternative Investments SP - 48 LP - 73 DO - 10.3905/jai.2013.15.4.048 VL - 15 IS - 4 AU - Hongfei Tang AU - Xiaoqing Eleanor Xu Y1 - 2013/03/31 UR - https://pm-research.com/content/15/4/48.abstract N2 - This article studies the performance and return deviation of real estate leveraged exchange-traded funds (RE LETFs) tracking the Dow Jones U.S. Real Estate Index (DJUSRE) and the Morgan Stanley U.S. REIT Index (RMZ) from their inception to March 2011. Relative to the broad-market LETFs tracking the S&amp;P 500 Index, the RE LETF market is marked with greater daily market inefficiency, less-predictable management tracking error, and much more pronounced negative compounding deviation. To avoid sample-specific bias, we also simulate the target performance of RE LETFs using the entire history of the DJUSRE from 1992 and show much less severe negative compounding deviation along with a consistent set of determinants. While the introduction of RE LETFs has provided investors with innovative financial instruments to leverage their long or short exposure to the traditional illiquid real estate sector, this article suggests that the behaviors, sources, and determinants of the return deviation on RE LETFs should be taken into consideration when formulating effective asset allocation strategies.TOPICS: Real estate, exchange-traded funds and applications, performance measurement ER -