Bias in Appraisal-Based Returns

This note quantifies and extends Giliberto's AREUEA Journal 16(1)] analysis of bias in appraisal-based returns. An important clarification and distinction is made, defining two different perspectives from which one may view appraisal return bias. The Giliberto analysis addressed bias in the holding period return only. Here, after reviewing and extending Giliberto's analysis in this regard, bias is considered from another perspective, that of the arithmetic mean of a time-series of appraisal-based returns. The two types of bias are likely to be of opposite sign, thereby possibly offsetting one another, so that we may often observe very little bias in the means of empirical appraisal-based returns time-series.