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Removing Biases in Computed Returns: An Analysis of Bias in Equally-Weighted Return Indexes of REITs


  • Lawrence Fisher

    (Department of Finance and Economics, Rutgers Business School, Rutgers University, 111 Washington Street, Newark, NJ 07102)

  • Daniel G. Weaver

    () (Department of Finance and Economics, Rutgers Business School, Rutgers University, 94 Rockafeller Road, Piscataway, NJ 08854-8054)

  • Gwendolyn Webb

    () (The Bert W. Wasserman Department of Economics and Finance, Baruch College, Zicklin School of Business, One Bernard Baruch Way, Box B10-225 New York, New York 10010)


In this paper, we apply the method for removing the upward bias in returns in equally-weighted return indexes developed by Fisher, Weaver, and Webb (2010) to real estate investment trust (REIT) stocks in the US. While we find significant bias in this index, two trends are evident: first, there is less overall bias than in non-REIT stocks, and second, the bias of REIT stocks has declined over time. These trends are consistent with growing listings of REIT stocks on the New York Stock Exchange (NYSE), as well as with increasingly higher stock prices. They also support the hypothesis that there have been significant improvements in the market micro-structure environment of REIT stocks since the early 1970s. We further apply our methodology to REIT stocks listed in the two countries with the largest number of REITs outside the US: Germany and Australia. The results support the hypothesized relationship between index bias and market micro-structure environment.

Suggested Citation

  • Lawrence Fisher & Daniel G. Weaver & Gwendolyn Webb, 2012. "Removing Biases in Computed Returns: An Analysis of Bias in Equally-Weighted Return Indexes of REITs," International Real Estate Review, Asian Real Estate Society, vol. 15(1), pages 43-71.
  • Handle: RePEc:ire:issued:v:15:n:01:2012:p:43-71

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    References listed on IDEAS

    1. Ko Wang & John Erickson & George Gau & Su Han Chan, 1995. "Market Microstructure and Real Estate Returns," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 23(1), pages 85-100.
    2. Marshall Blume & Robert Stambaugh, "undated". "Biases in Computed Returns: An Application to the Size Effect (Revision of 2-83)," Rodney L. White Center for Financial Research Working Papers 11-83, Wharton School Rodney L. White Center for Financial Research.
    3. Blume, Marshall E. & Stambaugh, Robert F., 1983. "Biases in computed returns : An application to the size effect," Journal of Financial Economics, Elsevier, vol. 12(3), pages 387-404, November.
    4. Chan, Su Han & Erickson, John & Wang, Ko, 2002. "Real Estate Investment Trusts: Structure: Structure, Performance, and Investment Opportunities," OUP Catalogue, Oxford University Press, number 9780195155341.
    5. Camilo SERRANO & Martin HOESLI, "undated". "Global Securitized Real Estate Benchmarks and Performance," Swiss Finance Institute Research Paper Series 08-39, Swiss Finance Institute.
    6. 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.
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    More about this item


    Unbiased market index; Bias in computed returns; Index construction; REITs;

    JEL classification:

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


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