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A Note on the use of Appraisal Data in Indexes of Performance Measurement

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  • S. Michael Giliberto
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    Abstract

    This paper demonstrates that even when unbiased appraisals of market value are used in measuring the investment performance of real estate portfolios, a bias in the rate of return or index is present. Further, in the case where the appraisal errors are serially independent, the bias is always positive. The potential for bias in a standard rate of return formula is described. Some implications for portfolio formation and investment manager comparisons are discussed. Copyright American Real Estate and Urban Economics Association.

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    Bibliographic Info

    Article provided by American Real Estate and Urban Economics Association in its journal Real Estate Economics.

    Volume (Year): 16 (1988)
    Issue (Month): 1 ()
    Pages: 77-83

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    Handle: RePEc:bla:reesec:v:16:y:1988:i:1:p:77-83

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    Cited by:
    1. Sampagnaro, Gabriele & Battaglia, Francesca, 2010. "Reliability and Heterogeneity of Real Estate Indexes and their Impact on the Predictability of Returns," MPRA Paper 23378, University Library of Munich, Germany.
    2. Waldo L. Born & Stephen A. Pyhrr, 1994. "Real Estate Valuation: The Effect of Market and Property Cycles," Journal of Real Estate Research, American Real Estate Society, American Real Estate Society, vol. 9(4), pages 455-486.
    3. Mukesh K. Chaudhry & Rohan A. Christie-David & William H. Sackley, 1999. "Long-Term Structural Price Relationships in Real Estate Markets," Journal of Real Estate Research, American Real Estate Society, American Real Estate Society, vol. 18(2), pages 335-354.
    4. Youguo Liang & Arjun Chatrath & Willard McIntosh, 1996. "Apartment REITs and Apartment Real Estate," Journal of Real Estate Research, American Real Estate Society, American Real Estate Society, vol. 11(3), pages 277-290.
    5. Robert Edelstein & Daniel Quan, 2006. "How Does Appraisal Smoothing Bias Real Estate Returns Measurement?," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 32(1), pages 41-60, February.
    6. Richard D. Evans, 1990. "A Transfer Function Analysis of Real Estate Capitalization Rates," Journal of Real Estate Research, American Real Estate Society, American Real Estate Society, vol. 5(3), pages 371-380.
    7. Peijie Wang & Colin Lizieri & George Matysiak, 1997. "Information asymmetry, long-run relationship and price discovery in property investment markets," The European Journal of Finance, Taylor & Francis Journals, Taylor & Francis Journals, vol. 3(3), pages 261-275.
    8. Benefield, Justin D. & Anderson, Randy I. & Zumpano, Leonard V., 2009. "Performance differences in property-type diversified versus specialized real estate investment trusts (REITs)," Review of Financial Economics, Elsevier, Elsevier, vol. 18(2), pages 70-79, April.
    9. S. Michael Giliberto, 1992. "The Allocation of Real Estate to Future Mixed-Asset Institutional Portfolios," Journal of Real Estate Research, American Real Estate Society, American Real Estate Society, vol. 7(4), pages 423-432.

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