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Can Fund Managers Select Outperforming REITs? Examining Fund Holdings and Trades

Posted: 31 Aug 2010 Last revised: 15 Sep 2011

Gjergji Cici

College of William and Mary - Mason School of Business

John B. Corgel

Cornell University

Scott Gibson

College of William and Mary - Mason School of Business

Multiple version iconThere are 3 versions of this paper

Date Written: August 30, 2010

Abstract

Despite at least six empirical studies published since 2000 designed to assess fund managers’ REIT selection ability, their skill remains in question. Unlike previous studies, we examine fund holdings and trades of REITs to answer this question. This approach allows us to explicitly account for portfolio rebalancing that alters REIT-characteristic weights of fund portfolios. Results show that fund managers, after controlling for property type, size, and momentum, generated significant positive alpha with their securities selection ability. To understand the sources of such ability, we examine whether fund managers who followed certain trading strategies outperformed relative to other managers. The potential trading strategies are based on public information related to geographic concentration, NAV-to-price ratios, income and appreciation styles, and leverage of the underlying REITs. Comparative and regression analyses show that none of the strategies fully explains why fund managers were able to select REITs that outperformed. We surmise that the outperformance mainly derives from the endemic abilities of managers to uniquely process REIT-specific information and generate private valuation beliefs that lead to profitable investment decisions.

Suggested Citation

Cici, Gjergji and Corgel, John B. and Gibson, Scott, Can Fund Managers Select Outperforming REITs? Examining Fund Holdings and Trades (August 30, 2010). Real Estate Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1668880

Gjergji Cici

College of William and Mary - Mason School of Business ( email )

P.O. Box 8795
Williamsburg, VA 23187-8795
United States
757-221-1826 (Phone)

John B. Corgel (Contact Author)

Cornell University ( email )

School of Hotel Administration
Ithaca, NY 14853
United States
607-255-4305 (Phone)
607-255-4179 (Fax)

George Scott Gibson

College of William and Mary - Mason School of Business ( email )

P.O. Box 8795
Williamsburg, VA 23187-8795
United States
757/221-1673 (Phone)

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