Commercial Real Estate Returns: An Anatomy of Smoothing in Asset and Index Returns

Real Estate Economics, Forthcoming

Posted: 11 Aug 2011

See all articles by Shaun A. Bond

Shaun A. Bond

UQ Business School

Soosung Hwang

Sungkyunkwan University - Department of Economics

Gianluca Marcato

Henley Business School - University of Reading

Multiple version iconThere are 2 versions of this paper

Date Written: August 11, 2011

Abstract

In this paper we investigate the commonly used auto-regressive filter method of adjusting appraisal-based real estate returns to correct for the perceived biases induced in the appraisal process. Many papers have been written on appraisal smoothing 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 we analyse a large sample of appraisal data at the individual-property level from the Investment Property Databank (IPD). We find that commonly used unsmoothing estimates at the index level 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 at the index level and an ARMA model at the individual property level.

Keywords: Commercial real estate, smoothing, ARFIMA

Suggested Citation

Bond, Shaun Alexander and Hwang, Soosung and Marcato, Gianluca, Commercial Real Estate Returns: An Anatomy of Smoothing in Asset and Index Returns (August 11, 2011). Real Estate Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1908372

Shaun Alexander Bond (Contact Author)

UQ Business School ( email )

The University of Queensland
Brisbane, QLD 4072
Australia

Soosung Hwang

Sungkyunkwan University - Department of Economics ( email )

25-2 Sungkyunkwan-ro
Jongno-Gu
110-745 Seoul
+82 (0)2 760 0489 (Phone)
+82 (0)2 744 5717 (Fax)

Gianluca Marcato

Henley Business School - University of Reading ( email )

Department of Real Estate & Planning
Reading, RG6 6UD
United Kingdom
+44 (0)118 3788178 (Phone)
+44 (0)118 3788172 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
514
PlumX Metrics