Strategies · Library · Real estate
§16.4Trend
Real estate momentum – regional approach
Property markets in US metro areas show momentum: areas that have done well recently tend to keep doing well, and weak ones keep lagging. REITs or housing index futures can be used for a zero-cost version.
- Asset class
- Real estate
- Held for
- Months
- Data
- Needs data ARCANE lacks
- Symphony
- Cannot be built as a symphony
The rule
- Signal
- Past return of each metro area's property prices
- Entry and exit
- Buy strong regions, sell weak ones; revisit as new index data arrives
- Sizing
- Rank-based, long strong and short weak
How it fails
- Slow, noisy indices
- Few tradable vehicles
- Reversal after booms
Data it needs
- regional house price indices
- REIT or housing futures prices
No regional property data.
How ARCANE uses it
Alpha could cite property momentum when answering a housing-market Call. Paper only.
Needs regional house price data and shorting.
Filed under the trend card
Hold each market in the direction of its own return over the past year, and size every position to the same expected volatility.
A paper plan from this card holds 21 to 252 days, stops at 2× the expected move and uses at most 100% of your risk budget. The card
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §16.4, p. 113 of the SSRN version. Described in our words. Trend is ARCANE’s filing, not the book’s.