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A Comparison of the Recent Performance of Publicly Traded Real Property Portfolios and Common Stock


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  • John D. Martin
  • Douglas O. Cook
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    In this study we compare the returns earned by investments in publicly traded limited partnerships (PTLPs), finite life equity REITs, and traditional equity REITs with those resulting from investing in common stocks (proxied by closed-end mutual funds). Performance comparisons are made using generalized stochastic dominance (GSD). This tool avoids the "joint hypothesis problem" that arises when an asset pricing model is used as a performance benchmark. The results of the analysis indicate that the performance of the closed-end mutual funds was preferred to that of the individual equity REITs (both traditional and finite life) and PTLP securities by a wide array of risk-averse investors. This result was most pronounced following the passage of the Tax Reform Act of 1986 which severely restricted the tax deductibility of real estate losses. When the equity REITs were combined into portfolios, their performance dominated the mutual funds during the 1980-85 period. Further, the PTLP portfolio returns were preferred to several of the mutual funds even in the post-1985 period. These findings reflect the fact that the securitized real property portfolios studied are not as well diversified as mutual funds. However, the mutual funds remained the dominant investment alternative in the post-1986 period. 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): 19 (1991)
    Issue (Month): 2 ()
    Pages: 184-212

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    Handle: RePEc:bla:reesec:v:19:y:1991:i:2:p:184-212

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    Cited by:
    1. Peter Oppenheimer & Terry V. Grissom, 1998. "Frequency Space Correlation Between REITs and Capital Market Indices," Journal of Real Estate Research, American Real Estate Society, vol. 16(3), pages 291-310.
    2. Marcus T. Allen & Jeff Madura & Kenneth J. Wiant, 1995. "Commercial Bank Exposure and Sensitivity to the Real Estate Market," Journal of Real Estate Research, American Real Estate Society, vol. 10(2), pages 129-140.
    3. David C. Ling, 1993. "Probabilistic Valuation Models and Income Tax Asymmetries with an Application to the Analysis of Passive Loss Restrictions," Journal of Real Estate Research, American Real Estate Society, vol. 8(2), pages 205-220.
    4. Barbara J. Davis & Roger M. Shelor, 1995. "Executive Compensation and Financial Performance in the Real Estate Industry," Journal of Real Estate Research, American Real Estate Society, vol. 10(2), pages 141-152.
    5. F.C. Neil Myer & James R. Webb, 1993. "Return Properties of Equity REITs, Common Stocks, and Commercial Real Estate: A Comparison," Journal of Real Estate Research, American Real Estate Society, vol. 8(1), pages 87-106.
    6. F.C. Neil Myer & James R. Webb, 1993. "The Effect of Benchmark Choice on Risk-Adjusted Performance Measures for Commingled Real Estate Funds," Journal of Real Estate Research, American Real Estate Society, vol. 8(2), pages 189-204.
    7. Tien Foo Sing, 2004. "Common risk factors and risk premia in direct and securitized real estate markets," Journal of Property Research, Taylor & Francis Journals, vol. 21(3), pages 189-207, December.
    8. Jun Han & Youguo Liang, 1995. "The Historical Performance of Real Estate Investment Trusts," Journal of Real Estate Research, American Real Estate Society, vol. 10(3), pages 235-262.


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