An Analysis of Commercial Real Estate Returns: Is there a Smoothing Puzzle?
In 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.
|Date of creation:||2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +44 (0) 118 378 8226
Fax: +44 (0) 118 975 0236
Web page: http://www.henley.reading.ac.uk/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Tsong-Yue Lai & Ko Wang, 1998. "Appraisal Smoothing: The Other Side of the Story," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(3), pages 511-535.
- Banerjee, Anindya & Urga, Giovanni, 2005. "Modelling structural breaks, long memory and stock market volatility: an overview," Journal of Econometrics, Elsevier, vol. 129(1-2), pages 1-34.
- David M. Geltner, 1993. "Estimating Market Values from Appraised Values without Assuming an Efficient Market," Journal of Real Estate Research, American Real Estate Society, vol. 8(3), pages 325-346.
- Andrew W. Lo & Craig A. MacKinlay, .
"An Econometric Analysis of Nonsyschronous-Trading,"
Rodney L. White Center for Financial Research Working Papers
19-89, Wharton School Rodney L. White Center for Financial Research.
- Scholes, Myron & Williams, Joseph, 1977. "Estimating betas from nonsynchronous data," Journal of Financial Economics, Elsevier, vol. 5(3), pages 309-327, December.
- Cho, Hoon & Kawaguchi, Yuichiro & Shilling, James D, 2003. "Unsmoothing Commercial Property Returns: A Revision to Fisher-Geltner-Webb's Unsmoothing Methodology," The Journal of Real Estate Finance and Economics, Springer, vol. 27(3), pages 393-405, November.
- David Geltner, 1993. "Temporal Aggregation in Real Estate Return Indices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 21(2), pages 141-166.
- Jim Clayton & David Geltner & Stanley W. Hamilton, 2001. "Smoothing in Commercial Property Valuations: Evidence from Individual Appraisals," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 29(3), pages 337-360.
- Carmelo Giaccotto & John Clapp, 1992. "Appraisal-Based Real Estate Returns under Alternative Market Regimes," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(1), pages 1-24.
- Fisher, Jeffrey D & Geltner, David M & Webb, R Brian, 1994. "Value Indices of Commercial Real Estate: A Comparison of Index Construction Methods," The Journal of Real Estate Finance and Economics, Springer, vol. 9(2), pages 137-64, September.
- David Geltner, 1989. "Bias in Appraisal-Based Returns," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(3), pages 338-352.
- Shaun A. Bond & Soosung Hwang, 2003. "A Measure of Fundamental Volatility in the Commercial Property Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(4), pages 577-600, December.
- Gerald R. Brown & George A. Matysiak, 1998. "Valuation smoothing without temporal aggregation," Journal of Property Research, Taylor & Francis Journals, vol. 15(2), pages 89-103, January.
- Quan, Daniel C & Quigley, John M, 1991. "Price Formation and the Appraisal Function in Real Estate Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 4(2), pages 127-46, June.
- Granger, C. W. J., 1980. "Long memory relationships and the aggregation of dynamic models," Journal of Econometrics, Elsevier, vol. 14(2), pages 227-238, October.
When requesting a correction, please mention this item's handle: RePEc:rdg:repxwp:rep-wp2006-17. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ed Quick)
If references are entirely missing, you can add them using this form.