Asset Allocation and the Performance of Real Estate Mutual Funds

We examine the performance of real estate mutual funds during January 1991–December 1997. As a group, the sampled funds outperformed the Wilshire Real Estate Securities Index on a risk-adjusted basis by more than 5 percentage points annually. We attempt to explain these surprising findings by examining the fund's asset allocations across stocks, bonds and real estate property types using Sharpe's (1992) effective-mix test. We find that all of the superior performance is attributable to fund managers' decisions to overweight outperforming property types (apartments and health care) relative to the Wilshire Real Estate Securities Index weights. Performance of the funds matches a multiple-property-type benchmark that takes account of the fund's exposure to each property type. Therefore, real estate funds demonstrated superior allocation across property types, but neither superior nor inferior selection within property type, during 1991–1997. Our findings emphasize the importance of asset allocation for real estate mutual-fund performance.     

Real Estate Mutual Funds: Herding,Momentum Trading and Performance

This study jointly examines herding, momentum trading and performance in real estate mutual funds (REMFs). We do this using trading and performance data for 159 REMFs across the period 1998–2008. In support of the view that Real Estate Investment Trust (REIT) stocks are relatively more transparent, we find that stock herding by REMFs is lower in REIT stocks than other stock. Herding behavior in our data reveals a tendency for managers to sell winners, reflective of the “disposition effect.” We find low overall levels of REMF momentum trading, but further evidence of the disposition effect when momentum trading is segregated into buy–sell dimensions. We test the robustness of our analysis using style analysis, and by reference to the level of fund dividend distribution. Our results for this are consistent with our conjecture about the role of transparency in herding, but they provide no new insights in relation to the momentum‐trading dimensions of our analysis. Summarizing what are complex interrelationships, we find that neither herding nor momentum trading are demonstrably superior investment strategies for REMFs.     

Real Estate Investment Funds: Performance and Portfolio Considerations

This paper presents the results of a study dealing with a number of issues regarding real estate investment. Utilizing a data set consisting of returns from two of the oldest, continuously operating commingled real estate funds (CREFs), questions relative to investment performance, inflation hedging attributes and diversification benefits are addressed. The methodology used in exploring these issues are variants of the traditional capital asset pricing model (CAPM), extended to consider uncertain inflation (CAPMUI) and an arbitrage pricing model in which real estate performance is judged relative to a more inclusive market index representing larger numbers of substitute investments. Finally, issues relative to portfolio performance are considered by constructing portfolios containing all possible combinations of real estate, stocks and bonds to assess the potential for diversification benefits and portfolio performance.     

The Timeline Estimation of Bubbles: The Case of Real Estate

We develop and then apply a new recursive regression methodology with a two‐direction searching process for initialization. The methodology improves the reliability of existing models when estimating a bubble's timeline. We apply our proposed methodology to estimate bubbles in U.S. home prices as well as in simulated scenarios. Our results confirm the improvement in reliability of the proposed methodology in obtaining consistent estimators with varying samples. Moreover, we verify the presence of bubbles in the U.S. aggregate data and seven of the eight cities in our study prior to the subprime crisis and find evidence of the bubble's reemergence since October 2013.     

The Investment Performance of Real Estate Limited Partnerships

Real estate limited partnerships have become an increasingly popular form of investment over the past decade. Many investors have been drawn to these investment vehicles because of the high claimed rates of return earned by investors in previous partnerships. However, there has been little analysis of the historical rates of return on these investments other than that provided by the syndicators in offering prospectuses. This paper examines the returns earned by investors in real estate limited partnerships over the past decade. These results are compared with previous studies of the investment performance of real estate. Because of the importance of the tax shield aspects of these investments, we calculate the after-tax rate of return for investors in several marginal tax brackets.     

Real Estate and Economies of Scale: The Case of REITs

Building on past research in the economies-of-scale debate, we test for scale economies in real estate investment trusts (REITs) by examining growth prospects, revenue and expense measures, profitability ratios, systematic risk and capital costs. Overall, we find that large REITs are increasing growth prospects while succeeding at lowering costs, leading to a direct relationship between firm profitability and firm size. Additionally, we find an inverse relationship between equity betas and firm size, and for all cost of capital measures we find significant scale economies. Further evidence from the stochastic frontier analysis suggests efficiency opportunities appear possible through continued growth and consolidation in REITs.     

Assessing the Performance of Real Estate Auctions

This article investigates the performance of real estate auctions relative to negotiated sales. It uses a repeat-sales methodology to control for unobserved differences in the quality of auction properties. Properties auctioned in Los Angeles during the 1980s boom sold at an estimated discount of 0%–9%, while sales in Dallas following the oil bust obtained discounts of 9%–21%. This evidence is consistent with the theoretical prediction that the auction discount increases in downturns when a seller trades-off a longer expected selling time in a search market against an immediate auction sale. The study finds no evidence of the declining price anomaly.     

The Gains from Corporate Selloffs: The Case of Real Estate Assets

Recent financial economics literature has hypothesized that variations in market structure influence the distribution of gains from corporate restructuring between buyers and sellers. We test this hypothesis using data on restructuring involving real estate assets by isolating the effects depending on multiple versus single bidders, acquisition frequency and transaction type. While we find gains for both buyers and sellers, the buyers gain only when they make few purchases. Those firms pursuing an acquisition strategy show no gains around the specific acquisition announcements. Additionally, both buyers and sellers are more likely to have a positive reaction to the announcement when the transaction is property rather than a division or subsidiary.     

The Theory and Evidence on Real Estate Financial Decisions: A Review of the Issues

There has developed a growing body of literature, both theoretically and empirically based, on real estate financial decisions. Despite these advances, there are a number of important issues that remain unanswered. The purpose of this paper is to provide a review and analysis of where research on real estate financial decisions has been, where it stands today, and where it is likely to be headed in the future. Some of the unresolved issues in real estate investment analysis are also discussed. The hope is that this review will provide the stimulus for solving some of these complex issues.     

The Effect of Corporate Governance on Investment: Evidence from Real Estate Investment Trusts

This study investigates the relation between firms' investment choices and various governance mechanisms, using a sample of real estate investment trusts (REITs). We find evidence that the responsiveness of REITs' investment expenditures to their opportunities depends on their corporate governance structures. Within the set of governance mechanisms that we examine, we find particularly strong links between investment behavior and ownership. Specifically, we find that the investment choices of REITs are more closely tied to Tobin's q if they have greater institutional ownership or if they have lower director and officer stock ownership. These results are consistent with institutional owners monitoring the firm's investment policies as well as with high insider ownership allowing managers to follow their own investment agendas.     

Equilibrium Real Options Exercise Strategies with Multiple Players: The Case of Real Estate Markets

This article derives a closed-form solution for an equilibrium real options exercise model with stochastic revenues and costs for monopoly, duopoly, oligopoly and competitive markets. Our model also allows one option holder to have a greater production capacity than others. Under a monopolistic environment we find that the optimal option exercise strategy in real estate markets is dramatically opposite to that in a financial (warrant) market, indicating the importance of paying attention to the institutional details of the underlying market when analyzing option exercise strategies. Our model can be generalized to the pricing of convertible securities and capital investment decisions involving both stochastic revenues and costs under different types of market structures.     

Risk and Return on Real Estate: Evidence from Equity REITs

We analyze monthly returns on an equally weighted index of eighteen to twenty-three equity (real property) real estate investment trusts (REITs) that were traded on major stock exchanges over the 1973–87 period. We employ a multifactor Arbitrage Pricing Model using prespecified macroeconomic factors. We also test whether equity REIT returns are related to changes in the discount on closed-end stock funds, which seems plausible given the closed-end nature of REITs.
Three factors, and the percentage change in the discount on closed-end stock funds, consistently drive equity REIT returns: unexpected inflation and changes in the risk and term structures of interest rates. The impacts of these variables on equity REIT returns is around 60% of the impacts on corporate stock returns generally. As expected, the impacts are greater for more heavily levered REITs than for less levered REITs. Real estate, at least as measured by the return performance of equity REITs, is less risky than stocks generally, but does not offer a superior risk-adjusted return and is not a hedge against unexpected inflation.     

基于超效率DEA的房地产信贷资金配置效率研究

文章针对投放到房地产领域的信贷资金配置效率问题进行研究,利用超效率DEA建立分析模型,以我国35个大中城市作为研究样本,分别选取了2005年的投入指标和2007年的产出指标,实证检验了上述城市房地产信贷资金的配置效率.研究发现,整体上房地产信贷资金配置效率不高,只有48%的城市达到了DEA有效,其余52%的城市没有达到DEA有效;投放在房地产领域的信贷资金,配置效率呈现出地域化分布,DEA有效的城市集中分布在东北和西北地区,未达到DEA有效的城市集中分布在中部和南方地区.     

Real Estate Valuation Under Rent Control: The Case of Santa Monica

This is a study on the impact of rent control in the city of Santa Monica on rents and apartment house values. Findings include that rent control has significantly lowered rents for tenants, lowered the real values of apartment buildings and that the gross rent multipliers of buildings sold subsequent to the passage of rent control failed to decline. This last finding is a result of, according to the author, optimism on the part of buyers that the controls will be modified or eliminated in the future.     

我国房地产业投资绩效分析

自实行住房分配货币化以来,中国的房地产业进入了快速发展时期。当前,以房价为核心的舆论和调控备受关注。通过运用数据包络分析（DEA）法,评价了自1998年以来中国房地产业的投资绩效问题。深入分析房价不断高涨而调控措施不力的原因,以期寻求更加全面科学的调控途径和办法,从而促进房地产业健康持续发展。     

The Composition of the Market Portfolio and Real Estate Investment Performance

This study investigates whether the composition of the market portfolio leads to different inferences on real estate performance. As a point of departure, this paper first explores whether the omission of assets in a market proxy leads to a biased measurement of investment performance. The study finds that ranking investment performance is not meaningless even though investment performance is inaccurately measured. Furthermore, the composition of the market proxy does not necessarily lead to different inferences on real estate investment performance although superior real estate investment performance arises from the omitted asset phenomenon and also from smoothing bias in general.     

The Disciplining Effect of Concern for Referrals: Evidence from Real Estate Agents

Real estate agents rely on clients for referrals to generate future business; this article examines whether concern for referrals disciplines agents. We compare results for sellers who move to another area (and are less likely to provide referrals) with results for sellers who remain in the area (and are more likely to provide referrals). We find that moving‐away sellers’ houses have a higher sale rate, sell faster and sell for less (even after controlling for moving‐away sellers’ greater impatience). We also provide evidence that the disciplining effect of concern for referrals is stronger for agents who place a greater value on reputation. Finally, among sellers who are better at evaluating and monitoring agents, we see less of the high sell rate, low sale‐price effect.     

Auction versus Negotiated Sale: Evidence from Real Estate Sales

We offer a theoretical and empirical comparison of auctions and negotiated sales. We first build a simple model to show that auctions generate a higher relative price than negotiated sales when demand for the asset is strong, when the asset is more homogeneous and when the asset attracts buyers with higher valuations. Using data from property sales in Singapore, we find support for our theoretical predictions. In addition, we find that auctions do not necessarily generate a higher price premium for foreclosed properties than for nonforeclosed properties.     

Competition and Efficiency in Transacting: The Case of Residential Real Estate Brokerage

This paper examines the functioning of the market for brokerage services for residential real estate. The central issue addressed is whether the manner in which brokerage services have traditionally been provided and priced is consistent with efficiency. In approaching this question, the paper first describes the activities usually associated with the brokerage function and develops criteria for the efficient provision of brokerage services. After the structural characterisitcs and pricing practices of the brokerage industry are analyzed, a model of brokerage firm competition is developed. The principal finding is that the traditional absence of price competition among brokers may have led to an inefficiently large commitment of resources to the brokerage industry, supported by excessive rates for consumers of brokerage services. These results stem from the way that competitive pressures emerge when price competition is largely suppressed.     

Real Estate in an ALM Framework: The Case of Fair Value Accounting

This study examines the liability hedging characteristics of both direct and indirect real estate with the advent of fair value accounting obligations for pension funds. We explicitly model pension obligations as being subject to interest and inflation risk to analyze the ability of real estate investments in hedging the fair value of pension liabilities and to quantify its role in an asset liability management (ALM) portfolio. We find that the portfolio composition differs depending on the definition of liability return. When liability returns solely follow actuarial changes, the mean‐variance efficient portfolio allocations toward direct real estate and fixed income decrease compared to the asset‐only optimization. When accounting for nominal liability obligations, real estate offers hedging benefits against interest rates for short holding periods but not for long‐term institutional portfolios. The inclusion of inflation risk renders a limited role for direct real estate in an ALM portfolio, while indirect real estate obtains no allocation. Inflation is at the heart of the discrepancy between reported and predicted pension plan allocations. Once accounting for inflation, the projected allocations come close to reported ones.