Capital Asset Pricing Model ( CAPM ).
Ra = Rf + βa ( Rmkt – Rf)
Expected return of an asset Ra = RiskFreeRate + βAsset * ( returnMkt- RiskFreeRate)
where:
Rf=risk-free rate
βi=beta of the investment
(ERm−Rf)=market risk premium
I read that β of real estate is 0.5 and accordingly, real estate should fluctuate 1/2 of the market fluctuation. It is somehow expected since real estate prices as well as rents do not change with the same rapidity as the stock market can change.
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Paolo
I am a realtor and investor in the DC area