An Analysis of Commercial Real Estate Returns: Is there a Smoothing Puzzle?
AbstractIn this paper we investigate the commonly used autoregressive filter method of adjusting appraisal-based real estate returns to correct for the perceived biases induced in the appraisal process. Since the early work by Geltner (1989), many papers have been written on this topic but remarkably few have considered the relationship between smoothing at the individual property level and the amount of persistence in the aggregate appraised-based index. To investigate this issue in more detail we analyse a sample of individual property level appraisal data from the Investment Property Database (IPD). We find that commonly used unsmoothing estimates overstate the extent of smoothing that takes place at the individual property level. There is also strong support for an ARFIMA representation of appraisal returns.
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Bibliographic InfoPaper provided by Henley Business School, Reading University in its series Real Estate & Planning Working Papers with number rep-wp2006-17.
Length: 34 pages
Date of creation: 2006
Date of revision:
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Real Estate Returns; Commercial Real Estate; Smoothing;
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Rodney L. White Center for Financial Research Working Papers
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