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

27 Pages Posted: 19 Jun 2010

See all articles by Lawrence Fisher

Lawrence Fisher

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics

Daniel G. Weaver

Rutgers Business School

Gwendolyn P. Webb

City University of New York (CUNY) - Baruch College - Zicklin School of Business

Date Written: June 8, 2010

Abstract

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 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 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 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 microstructure environment.

Suggested Citation

Fisher, Lawrence and Weaver, Daniel G. and Webb, Gwendolyn P., Removing Biases in Computed Returns: An Analysis of Bias in Equally-Weighted Return Indexes of REITs (June 8, 2010). Available at SSRN: https://ssrn.com/abstract=1625830 or http://dx.doi.org/10.2139/ssrn.1625830

Lawrence Fisher

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics ( email )

111 Washington Avenue
Newark, NJ 07102
United States

Daniel G. Weaver

Rutgers Business School ( email )

94 Rockafeller Road
Piscataway, NJ 08854
United States
848.445.5644 (Phone)
732.445.2333 (Fax)

HOME PAGE: http://weaver.rutgers.edu

Gwendolyn P. Webb (Contact Author)

City University of New York (CUNY) - Baruch College - Zicklin School of Business ( email )

Department of Economics & Finance
P.O. Box B13-289 1 Bernard Baruch Way
New York, NY 10010
United States
646-312-3485 (Phone)

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