Graph the performance trends of direct property, shares, A- REITs and bonds over 1985-2019; comment on relevant trends?



Assessment Questions (40 Marks)

Total return performance 1985-2019


By using the total return index:


Question No. 1 Graph the performance trends of direct property, shares, A- REITs and bonds over 1985-2019; comment on relevant trends?



Question No. 2 Graph the performance trends of office, retail and industrial property sub-sectors over 1985-2019; comment on relevant trends.




Question No. 3 Calculate the various annual returns for 1985-2019.



Question No. 4 Based on the results in Question 3, calculate the average annual returns for each investment for the following time periods:

·         2015-2019 (5 years)

·         2013-2019 (7 years)

·         Pre-2000: 1985-1999

·         Post-2000: 2000-2019; based on the average annual return calculation, comment on their 2000-2019 performance in comparison to the performance observed in the 1985-1999 period.



Question No. 5 Calculate the average annual return and risk for each of these investments for the full period: 1985-2019; comment.


Note: For 4 and 5 above, use the geometric mean, not the arithmetic means in calculating the average annual return.









Question No. 6 Calculate the correlation coefficient and construct the inter-asset correlation matrix for these assets over 1985- 2019.




Question No. 7. Based on the results in Question 6, explain in-detail on the inter-asset correlations concerning portfolio diversification for the following scenarios:

·         do A-REITs provide an effective property investment exposure for investors?

·         are there any diversification benefits between the three direct property sub-sectors: office, retail and industrial?

·          if an investor has a traditional portfolio of shares and bonds, would the inclusion of direct property enhance diversification benefits?





Question No. 8 Based on the results in Question 6, discuss the inflation- hedging characteristics of direct property, A-REITs, shares and bonds




Question No. 9 Based on the results in Question 5:

·         Construct the risk-return diagram for these investments.

·         Calculate the risk-to-return ratio and return-to-risk ratio for these investments.

·         Calculate the Sharpe ratio for these investments.

·         Comment on their risk-adjusted performance.


Note: For Question 10 onward, use the 2000-2019 annual returns






Question No. 10 By using the 20-year annual returns over 2000-2019 and including the office, retail and industrial property sub-sectors in a property-sector only portfolio:

·         calculate the portfolio return and risk with 45% office | 35% retail | 20% industrial

·         determine the optimum composition of these three property sub-sectors that gives the highest return-to-risk ratio performance.

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