Nowadays more and more investors pay attentions to equity real estate investment trusts (EREITs). They take it as partial substitutes for conventional real estate investments, although the correlation between EREIT and real estate returns improved by mathematics is insignificant. However, this study took the result that the residuals from regressions model of both real estate series on financial asset returns are significantly correlated. This supports the tangible that there is relationship linked with real estate that affects both sets of returns. What’s more, lagged values of the EREIT residuals to some extent helps explain variations in the conventional unsecuritized real estate return model.
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