REIT Momentum and the Performance of Real Estate Mutual Funds

34 Pages Posted: 17 Jul 2008 Last revised: 10 Jun 2009

See all articles by Jeroen Derwall

Jeroen Derwall

Maastricht University - European Centre for Corporate Engagement; Maastricht University - Department of Finance; Utrecht University - School of Economics

Joop Huij

Erasmus University - Rotterdam School of Management; Robeco; Erasmus University Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM)

Dirk Brounen

Erasmus University Rotterdam (EUR) - Department of Financial Management; Erasmus Research Institute of Management (ERIM); Tinbergen Institute

Wessel Marquering

Erasmus University Rotterdam (EUR) - Department of Financial Management

Multiple version iconThere are 2 versions of this paper

Date Written: July 16, 2008

Abstract

REITs exhibit a large and prevalent momentum effect that is not captured by conventional factor models. We show that this REIT momentum anomaly hampers proper judgments about the active management of REIT portfolios. By contrast, a REIT momentum factor provides incremental explanatory power to performance attribution models for REIT portfolios. Using this factor, we find that REIT momentum explains a great deal of the abnormal returns that actively managed REIT mutual funds earn in aggregate according to earlier related studies. Accounting for exposure to REIT momentum also materially influences cross-sectional comparisons of the performance of REIT mutual funds. Our results have important implications for performance evaluation, alpha-beta separation, and manager selection and compensation.

Keywords: momentum, performance, mutual funds, REITs

Suggested Citation

Derwall, Jeroen and Derwall, Jeroen and Huij, Joop and Brounen, Dirk and Marquering, Wessel A., REIT Momentum and the Performance of Real Estate Mutual Funds (July 16, 2008). ERIM Report Series Reference, Available at SSRN: https://ssrn.com/abstract=1161160 or http://dx.doi.org/10.2139/ssrn.1161160

Jeroen Derwall (Contact Author)

Maastricht University - European Centre for Corporate Engagement ( email )

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Joop Huij

Erasmus University - Rotterdam School of Management ( email )

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Dirk Brounen

Erasmus University Rotterdam (EUR) - Department of Financial Management ( email )

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Wessel A. Marquering

Erasmus University Rotterdam (EUR) - Department of Financial Management ( email )

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