The dynamics of property trust risk and correlation

Listed property trust (LPTs) have been the most successful indirect property investment vehicle in Australia. Surveys conducted by the Australian Stock Exchange in 1999 found that the LPT sector was the fastest growing stockmarket sector, increasing its number of investors by 88%, compared to the overall stockmarket increase in investors of 21%. At June 2000, the LPT sector accounted for over $33.5 billion in market capitalisation, representing 5.2% of total stockmarket capitalisation. While the relationship between REITs and the U.S. stockmarket has attracted considerable attention (eg: Eichholtz and Hartzell, 1996; Goldstein and Nelling, 1999; Mueller et al, 1994; Myer and Webb, 1993, 1994; Okunev and Wilson, 1997; Terris and Myer, 1995; Wilson and Okunev, 1996, 1999; Wilson et al, 1998), the equivalent relationship between property trusts and the Australian stockmarket (ASX) has only received limited attention (Newell and MacFarlane, 1996; Okunev and Wilson, 1997; Wilson and Okunev, 1996, 1999; Wilson et al, 1998). Given the significance of LPTs in Australia, further research into the relationship between LPTs and the stockmarket is needed.