How is the Dow Jones REIT Index Determined? – Finance-Base
42.28 F
New York
November 26, 2021
QuickBooks Payroll - Free 30-Day Trial
Image default

How is the Dow Jones REIT Index Determined?

REITs are real estate investment trusts made up of companies that have a direct involvement in the ownership, financing of or management of the operations of real estate holdings. The Dow Jones Index provides information and tracking of those publicly traded shares to provide investors with trends in performance details. The Index doesn’t necessarily rank the performance from the REITs but it does provide useful information for completing this task goal. To better understand the Dow Jones REIT Index and how it is determined, we offer an introduction to the purpose and ranking process for choice of the publicly traded REITs.

The purpose of the Dow Jones REIT Index

An Index is a listing of stocks that have been classified within certain category. It must follow the established requirements to qualify as an REIT. You can think of an index as a list or a group that's closely related by one common feature or several. The Dow Jones REIT Index serves the purpose of measuring publicly traded REIT performance together with similar securities. It is considered to be a subindex of the Dow Jones Global Select Real Estate Securities Index. Measurements of globally traded REITs and property operating companies are included. The main focus of these measurements is limited to companies driven by property value factors and those that are impelled by other factors are excluded in the index. It is real estate specific.

How is the Dow Jones REIT Index determined?

Companies which are classified as real estate investment trusts with a focus upon property, not driven by other values are examined. This is to ensure that your investment is focused upon the real estate market instead of some hidden objectives that are not related specifically to real estate. This process includes the study of companies through the mandatory disclosures as described in the SEC regulations for providing a variety of information about the purpose of the company and it is holdings. Companies that have declared an IPO to be contained in the national stock market exchange are required by law to maintain transparency and submit a wide range of facts about the purpose and operations from the business.This is her main distinction between publicly traded REITs and private REITs which are much less regulated.

The SPDR Down Jones REIT ETF

This investment classification is a non-diversified fund which invests all assets in the securities that make up the index with a caveat that at least 80% of investments are made in the REIT index. The investment provides results prior to fees and expenses on investments in correspondence to the total return performance from the Dow Jones U.S. Select REIT index.

Useful information the Dow Jones REIT Index provides

The information provided by the Down Jones REIT Index is useful in gathering information about the daily performance of shares which are categorized as an REIT. This allows individuals and organizations to check performance measures to identify current status, past performance, and trends regarding the REIT. It’s useful for developing a ranking of each ETF for investment or tracking purposes. A breakdown of the components measured include:


The costs include price of shares and brokerage fees for getting and trading the shares.

Tracking error

When coping with publicly traded stocks, the tracking error is important for determining the measurement of risk by adding this investment to your portfolio. This is exactly what the tracking error let you know. This data indicates the chance of an investment portfolio in Correlation to active management decisions which are made by the manager of the portfolio and it shows just how much a portfolio aligns using the index to which it is assigned.

Bid/ask ratio

The bid/ask ratio shows the facts of how much the ask price of a share goes above the bid price to have an asset that is included in the market. It’s the difference between the highest price per share a purchaser is willing to pay for the stock and the lowest price that the company selling the stock is willing to accept. To further simplify this, it’s dependent on the highest the stock prices go and also the lowest they’ve been over specific amounts of time.

Holdings Diversity

REITs are an asset class and also the REITs are not always associated to stocks so they offer a degree of portfolio diversification. The rationale for diversification of a portfolio is because various holdings/assets react differently to specific events that occur inside the stock market. It helps to minimize the potential risks associated with the overall investment portfolio.


To summarize a process that can seem complex, the Dow Jones Index is determined by considering the purpose and activities of the company to ensure that they qualify for inclusion as a publicly traded REIT. This involves an analysis of the information that is supplied as a requirement of the SEC. Most or all the focus driving the company must involve ownership, management of or financing of real estate related ventures. All Dow Jones Indexed REITs meet a particular criteria in order to qualify. The Index is offered to provide investors with solid information about these stocks that indicate their performance on a daily basis as well as indicating historical trends and patterns in performance.

The index is used by individuals and organization to position the risks associated with each company which is helpful in making recommendations to investors about the risks and potential benefits involved. The Dow Jones REIT Index saves a lot of time and effort that would otherwise be spent by analysts or investors who are looking for real estate specific investments. It offers all of the necessary information for determining the risk, diversification indications and all of the historical data in regards to a real estate related stock that's necessary to make an informed decision about whether or not to invest in a particular REIT.

Related posts

Are Dividends Considered An Expense For A Company?


Carphone Warehouse set to close almost 100 stores Magazine


UK Steel Enterprise extends funding across North Lincs


Leave a Comment