The Composition of the Market Portfolio and Real Estate Investment Performance |
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| Authors: | Crocker H Liu David J Hartzell Terry V Grissom Wylie Greig |
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| Institution: | Department of Finance, Stern School of Business, New York University, 900 Tisch Hall, New York, New York 10003.;Graduate School of Business, University of North Carolina, Campus Box No. 3490, Carroll Hall, Chapel Hill, North Carolina 27599-3490.;Texas Real Estate Research Center, Texas A&M, College Station, Texas 78743.;The RREEF Funds, 650 California Street, 18th Floor, San Francisco, California 94108. |
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| Abstract: | 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. |
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