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Efficiency, Scale Economies, and the Risk/Return Performance of Real Estate Investment Trusts

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  • Michael Devaney

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  • William Weber

    ()

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    Abstract

    Estimates from a directional output distance function are used to construct a risk/return frontier that defines the best-practice management technology for Real Estate Investment Trusts (REITs). We model REIT performance as a production process in which each REIT produces a desirable output (return) and an undesirable output (risk) using inputs of managerial effort and financial capital. The results suggest that ignoring the effects of risk yields a management technology that is significantly different from one that incorporates risk. In addition, market valuation is inversely related to inefficiency and directly related to leverage. Copyright Springer Science + Business Media, Inc. 2005

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    File URL: http://hdl.handle.net/10.1007/s11146-005-2791-5
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    Bibliographic Info

    Article provided by Springer in its journal The Journal of Real Estate Finance and Economics.

    Volume (Year): 31 (2005)
    Issue (Month): 3 (November)
    Pages: 301-317

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    Handle: RePEc:kap:jrefec:v:31:y:2005:i:3:p:301-317

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    Web page: http://www.springerlink.com/link.asp?id=102945

    Related research

    Keywords: best-practice technology; REIT risk/return; directional distance function;

    References

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    Cited by:
    1. Devaney, Michael, 2012. "Financial crisis, REIT short-sell restrictions and event induced volatility," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(2), pages 219-226.

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