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Other Asset Classes Predict REIT Returns?

Steve LeCompte | | Posted in: Real Estate

A subscriber asked whether behaviors of other asset classes predict those of real estate investment trusts (REIT) as proxied by Vanguard Real Estate Index Fund ETF Shares (VNQ). To investigate, we relate VNQ monthly returns to monthly returns of four exchange-traded fund (ETF) asset class proxies:

  1. SPDR S&P 500 ETF (SPY)
  2. iShares 20+ Year Treasury Bond ETF (TLT)
  3. iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)
  4. SPDR Gold Shares (GLD)

Specifically, we perform a monthly lead-lag analysis for VNQ return versus return for each of the other four ETFs, and we examine average next-month VNQ return across ranges of monthly returns for these four ETFs. Using monthly dividend-adjusted returns for VNQ, SPY, TLT, LQD and GLD from VNQ inception in September 2004 (except November 2004 for GLD) through May 2025, we find that:

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