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

32 Pages Posted: 17 Aug 2011

See all articles by Gjergji Cici

Gjergji Cici

University of Kansas - School of Business

Jack Corgel

affiliation not provided to SSRN

Multiple version iconThere are 3 versions of this paper

Date Written: Fall 2011

Abstract

Despite at least six empirical studies published since 2000 designed to assess fund managers’ Real Estate Investment Trust (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, net‐asset‐value‐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, Jack, Can Fund Managers Select Outperforming REITs? Examining Fund Holdings and Trades (Fall 2011). Real Estate Economics, Vol. 39, Issue 3, pp. 455-486, 2011, Available at SSRN: https://ssrn.com/abstract=1911065 or http://dx.doi.org/10.1111/j.1540-6229.2010.00304.x

Gjergji Cici (Contact Author)

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Jack Corgel

affiliation not provided to SSRN

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