Obviousness of REITs?

I very much enjoy papers such as

Antonacci, Gary, Risk Premia Harvesting Through Momentum (September 5, 2012). Available at SSRN: http://ssrn.com/abstract=2042750 or http://dx.doi.org/10.2139/ssrn.2042750

Faber, Mebane T., A Quantitative Approach to Tactical Asset Allocation (February 17, 2009). Journal of Wealth Management, Spring 2007. Available at SSRN: http://ssrn.com/abstract=962461

and clearly the finance community appreciates these with the first as a First place winner of the 2012 NAAIM Wagner Awards for Advancements in Active Investment Management and the second with a download rank of 2 on SSRN with 273,000 abstract views.

However, I struggle mightily with how obvious would these papers’ choice of assets been without the benefit of hindsight.  I already briefly touched on this flaw in Bonds Much Sharpe -r Than Buffett.  Of course, using what we now know is one of the best asset classes in the history of the world that has also experienced an anomalous and extremely negative correlation with equities during their distress will provide a very positive result.  Unfortunately, I have yet to find any research from the late 1970s or early 1980s that predicted such a glorious environment for bonds.

Similar but not quite as extreme, adding REITs (all my posts about REITs)  over the last 12 years in any way would almost guarantee a pleasant result.  However, REITs were not so stellar for the 15 year period 1984-1999.  Would REITs have been such an obvious choice in 1999?  Of course, if we know the future, but I’m not so sure when we only knew the past.

From TimelyPortfolio

From TimelyPortfolio

From TimelyPortfolio

Also, how obvious would gold have been in 1998 or how obvious would high yield have been in the early 1980s when they did not even exist? Can we expect the next 10 years to look like the last 10 years?

R code from GIST: