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Commercial Real Estate Returns

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  • Mike Miles
  • Tom McCue

Abstract

In the commercial real estate market, which is perceived to be relatively inefficient, investors have comparative advantages; hence there are significant costs to diversification. This paper presents for the first time a series of market (or quasi-market) returns for a large data base. This data base is believed to be the most complete commercial real estate data base yet constructed. The paper empirically evaluates the benefits of diversification along various dimensions within the commercial real estate opportunity set. The analysis confirms certain aspects of prior work concerning inflation protection and diversification opportunities while concluding that even investment grade real estate investments are heterogeneous assets. Copyright American Real Estate and Urban Economics Association.

Suggested Citation

  • Mike Miles & Tom McCue, 1984. "Commercial Real Estate Returns," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(3), pages 355-377.
  • Handle: RePEc:bla:reesec:v:12:y:1984:i:3:p:355-377
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    References listed on IDEAS

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    1. Martin, John D & Klemkosky, Robert C, 1976. "The Effect of Homogeneous Stock Groupings on Portfolio Risk," The Journal of Business, University of Chicago Press, vol. 49(3), pages 339-349, July.
    2. Elton, Edwin J & Gruber, Martin J, 1977. "Risk Reduction and Portfolio Size: An Analytical Solution," The Journal of Business, University of Chicago Press, vol. 50(4), pages 415-437, October.
    3. Paul F. Wendt & Sui N. Wong, 1965. "Investment Performance: Common Stocks Versus Apartment Houses," Journal of Finance, American Finance Association, vol. 20(4), pages 633-646, December.
    4. Ricks, R Bruce, 1969. "Imputed Equity Returns on Real Estate Financed with Life Insurance Company Loans," Journal of Finance, American Finance Association, vol. 24(5), pages 921-937, December.
    5. Sears, R. Stephen & Trennepohl, Gary L., 1982. "Measuring Portfolio Risk in Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 17(03), pages 391-409, September.
    6. Hoag, James W, 1980. " Towards Indices of Real Estate Value and Return," Journal of Finance, American Finance Association, vol. 35(2), pages 569-580, May.
    7. Richard W. McEnally & Calvin M. Boardman, 1979. "Aspects Of Corporate Bond Portfolio Diversification," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 2(1), pages 27-36, March.
    8. Mike Miles & Tom Mc Cue, 1982. "Historic Returns and Institutional Real Estate Portfolios," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 10(2), pages 184-199.
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    Cited by:

    1. James L. Kuhle & Carl H. Walther & Charles H. Wurtzebach, 1986. "The Financial Performance of Real Estate Investment Trusts," Journal of Real Estate Research, American Real Estate Society, vol. 1(1), pages 67-75.
    2. Michael Devaney & William Rayburn, 1988. "When a House Is More Than a Home: Performance of the Household Portfolio," Journal of Real Estate Research, American Real Estate Society, vol. 3(1), pages 75-85.
    3. Stuart Fletcher, 1993. "Portfolio Considerations in Commingled Real Estate Funds," Journal of Real Estate Research, American Real Estate Society, vol. 8(2), pages 171-188.
    4. James R. Webb & Jack H. Rubens, 1987. "Tax Rates and Implicit Rates of Return on Owner-Occupied Single-Family Housing," Journal of Real Estate Research, American Real Estate Society, vol. 2(2), pages 11-28.
    5. Robert Edelstein & Daniel Quan, 2006. "How Does Appraisal Smoothing Bias Real Estate Returns Measurement?," The Journal of Real Estate Finance and Economics, Springer, vol. 32(1), pages 41-60, February.
    6. Maurizio d'Amato, 2001. "Within Real Estate Portfolio. Diversification through Rough Set Theory," ERES eres2001_141, European Real Estate Society (ERES).
    7. John Glascock & Lynne Kelly, 2007. "The Relative Effect of Property Type and Country Factors in Reduction of Risk of Internationally Diversified Real Estate Portfolios," The Journal of Real Estate Finance and Economics, Springer, vol. 34(3), pages 369-384, April.
    8. Colin Lizieri & Charles Ward, 2000. "Commercial Real Estate Return Distributions: A Review Of Literature And Empirical Evidence," Real Estate & Planning Working Papers rep-wp2000-01, Henley Business School, Reading University.
    9. Kuan-Min, Wang & Yuan-Ming, Lee & T.T.Binh, Nguyen, 2008. "Asymmetric Inflation Hedge of Housing Return: A Non-linear Vector Error Correction Approach," International Real Estate Review, Asian Real Estate Society, vol. 11(1), pages 65-82.
    10. David Geltner, 1989. "Estimating Real Estate's Systematic Risk from Aggregate Level Appraisal-Based Returns," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(4), pages 463-481.
    11. William C. Wheaton & Raymond G. Torto, 1989. "Income and Appraised Values: A Reexamination of the FRC Returns Data," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(4), pages 439-449.
    12. Tarbert, Heather, 1998. "The long-run diversification benefits available from investing across geographical regions and property type: evidence from cointegration tests1," Economic Modelling, Elsevier, vol. 15(1), pages 49-65, January.

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