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Serial Persistence in Equity REIT Returns

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Abstract

Annual and monthly REIT returns display statistically significant serial persistence, although the two types of persistence behavior are qualitatively different. By contrast, quarterly REIT returns do not display serial persistence. This strongly suggests that linear multifactor market models cannot describe REIT investment behavior. Annual REIT returns fail to reflect corresponding persistence behavior in underlying real estate returns precisely when the REITs are large enough to attract institutional investor interest. Institutional investors move in and out of large-capitalization REITs in ways that negatively impact investment returns.

Suggested Citation

  • Richard A. Graff & Michael S. Young, 1997. "Serial Persistence in Equity REIT Returns," Journal of Real Estate Research, American Real Estate Society, vol. 14(3), pages 183-214.
  • Handle: RePEc:jre:issued:v:14:n:3:1997:p:183-214
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    File URL: http://pages.jh.edu/jrer/papers/pdf/past/vol14n03/v14p183.pdf
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    References listed on IDEAS

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    1. Grinblatt, Mark & Titman, Sheridan, 1992. " The Persistence of Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 47(5), pages 1977-1984, December.
    2. Tsong-Yue Lai & Ko Wang, 1998. "Appraisal Smoothing: The Other Side of the Story," Real Estate Economics, American Real Estate and Urban Economics Association, pages 511-535.
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    Cited by:

    1. Camilo Serrano & Martin Hoesli, 2010. "Are Securitized Real Estate Returns more Predictable than Stock Returns?," The Journal of Real Estate Finance and Economics, Springer, pages 170-192.
    2. Maximilian D. Schmeiser & Matthew B. Gross, 2016. "The Determinants of Subprime Mortgage Performance Following a Loan Modification," The Journal of Real Estate Finance and Economics, Springer, pages 1-27.
    3. Michael S. Young, 2000. "REIT Property-Type Sector Integration," Journal of Real Estate Research, American Real Estate Society, pages 3-21.
    4. Felix Schindler, 2013. "Predictability and Persistence of the Price Movements of the S&P/Case-Shiller House Price Indices," The Journal of Real Estate Finance and Economics, Springer, pages 44-90.
    5. Vinod Chandrashekaran, 1999. "Time-Series Properties and Diversification Benefits of REIT Returns," Journal of Real Estate Research, American Real Estate Society, pages 91-112.
    6. Camilo Serrano & Martin Hoesli, 2010. "Are Securitized Real Estate Returns more Predictable than Stock Returns?," The Journal of Real Estate Finance and Economics, Springer, pages 170-192.
    7. Ghysels, Eric & Plazzi, Alberto & Valkanov, Rossen & Torous, Walter, 2013. "Forecasting Real Estate Prices," Handbook of Economic Forecasting, Elsevier.
    8. Steven Devaney & Stephen Lee & Michael Young, 2004. "Serial Persistence in Individual Real Estate Returns in the UK," Real Estate & Planning Working Papers rep-wp2004-13, Henley Business School, Reading University.
    9. Ping Cheng & Stephen E. Roulac, 2007. "REIT Characteristics and Predictability," International Real Estate Review, Asian Real Estate Society, vol. 10(2), pages 23-41.
    10. Helmut Fryges & Sandra Gottschalk & Karsten Kohn, 2010. "The KfW/ZEW Start-up Panel: Design and Research Potential," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 130(1), pages 117-132.
    11. Simon Stevenson, 2002. "Momentum Effects and Mean Reversion in Real Estate Securities," Journal of Real Estate Research, American Real Estate Society, vol. 23(1/2), pages 47-64.
    12. Felix Schindler, 2014. "Persistence and Predictability in UK House Price Movements," The Journal of Real Estate Finance and Economics, Springer, pages 132-163.

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    JEL classification:

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

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