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Performance Attributions: Pure Theory Meets Messy Reality

Author

Listed:
  • Michael S. Young

    (RREEF, San Francisco, CA)

  • Susan Annis

    (RREEF, San Francisco, CA)

Abstract

This article is the winner of The Best Research Paper Presented by a Practicing Real Estate Professional manuscript prize [sponsored by the American Real Estate Society Foundation (ARESF)] presented at the 2001 American Real Estate Society Annual Meeting. The popularity of performance attribution in the publicly-traded equities arena may soon spill over to real estate markets. With that in mind, this study analyzes the practical and statistical problem that may arise when real estate managers apply this technique to their portfolios. The study involves three data sets: a portfolio of publicly-traded REITs, a single-client separate account and a multi-client private REIT. The findings indicate that there is no clear distinction between stock selection and sector allocation in any of the data sets (i.e., the portfolio impact of the manager’s sector allocation and asset selection decisions are, on average, indistinguishable). Also, for the publicly-traded REIT portfolio (the only data set with sufficient sample size), the monthly returns attributed to stock selection versus sector allocation do not display significant serial persistence (i.e., the manager cannot consistently attribute the portfolio returns to either the stock selection or sector allocation decision).

Suggested Citation

  • Michael S. Young & Susan Annis, 2002. "Performance Attributions: Pure Theory Meets Messy Reality," Journal of Real Estate Research, American Real Estate Society, vol. 23(1/2), pages 3-28.
    • Handle: RePEc:jre:issued:v:23:n:1/2:2002:p:3-28
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    File URL: http://pages.jh.edu/jrer/papers/pdf/past/vol23n0102/02.3_28.pdf
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    References listed on IDEAS

    as
    1. Michael S. Young, 2000. "REIT Property-Type Sector Integration," Journal of Real Estate Research, American Real Estate Society, vol. 19(1), pages 3-21.
    2. Fama, Eugene F, 1972. "Components of Investment Performance," Journal of Finance, American Finance Association, vol. 27(3), pages 551-567, June.
    3. Graff, Richard A & Young, Michael S, 1996. "Real Estate Return Correlations: Real-World Limitations on Relationships Inferred from NCREIF Data," The Journal of Real Estate Finance and Economics, Springer, vol. 13(2), pages 121-142, September.
    4. 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.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Armonat, Stefan & Pfnür, Andreas, 2003. "Asset allocation versus entrepreneurial decisions in real estate investment," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 35582, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).

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    More about this item

    JEL classification:

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

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