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Systematic Behavior in Real Estate Investment Risk: Performance Persistence in NCREIF Returns

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Serial dependence of total annual returns in the NCREIF database is shown to be statistically significant in the first and fourth quartiles of disaggregated data between 1978 and 1994. More precisely, superior performance is generally followed by continued superior performance, and inferior performance is generally followed by continued inferior performance. In contrast, there is virtually no evidence to support serial dependence in the second or third quartiles, whether combined or taken separately. The empirical rejection of serial independence among real estate returns calls into question the conclusions of research based upon models that incorporate the assumption of serial independence.

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  • Michael S. Young & Richard A. Graff, 1996. "Systematic Behavior in Real Estate Investment Risk: Performance Persistence in NCREIF Returns," Journal of Real Estate Research, American Real Estate Society, vol. 12(3), pages 369-382.
    • Handle: RePEc:jre:issued:v:12:n:3:1996:p:369-382
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    1. Liu, Crocker H & Hartzell, David J & Grissom, Terry V, 1992. "The Role of Co-skewness in the Pricing of Real Estate," The Journal of Real Estate Finance and Economics, Springer, vol. 5(3), pages 299-319, September.
    2. Young, Michael S & Graff, Richard A, 1995. "Real Estate Is Not Normal: A Fresh Look at Real Estate Return Distributions," The Journal of Real Estate Finance and Economics, Springer, vol. 10(3), pages 225-259, May.
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    1. Camilo Serrano & Martin Hoesli, 2010. "Are Securitized Real Estate Returns more Predictable than Stock Returns?," The Journal of Real Estate Finance and Economics, Springer, vol. 41(2), pages 170-192, August.
    2. R. Kelley Pace & Raffaella Calabrese, 2022. "Ignoring Spatial and Spatiotemporal Dependence in the Disturbances Can Make Black Swans Appear Grey," The Journal of Real Estate Finance and Economics, Springer, vol. 65(1), pages 1-21, July.
    3. Felix Schindler, 2013. "Predictability and Persistence of the Price Movements of the S&P/Case-Shiller House Price Indices," The Journal of Real Estate Finance and Economics, Springer, vol. 46(1), pages 44-90, January.
    4. Charles Ka Yui Leung & Patrick Wai Yin Cheung & Erica Jiajia Ding, 2008. "Intra-metropolitan Office Price and Trading Volume Dynamics: Evidence from Hong Kong," International Real Estate Review, Global Social Science Institute, vol. 11(2), pages 47-74.
    5. Steven P. Devaney & Stephen L. Lee & Michael S. Young, 2007. "Serial persistence in individual real estate returns in the UK," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 25(3), pages 241-273, May.
    6. Simon Stevenson, 2002. "Momentum Effects and Mean Reversion in Real Estate Securities," Journal of Real Estate Research, American Real Estate Society, vol. 23(1/2), pages 47-64.

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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