Manipulation in U.S. REIT Investment Performance Evaluation: Empirical Evidence

Posted: 4 Sep 2013

See all articles by Jamie Alcock

Jamie Alcock

The University of Sydney Business School; Centre for International Finance and Regulation (CIFR)

John L. Glascock

University of Connecticut - School of Business - Center for Real Estate and Urban Economic Studies; European Business School

Eva Steiner

Cornell SC Johnson College of Business

Date Written: September 3, 2013

Abstract

We investigate whether Real Estate Investment Trust (REIT) managers actively manipulate performance measures in spite of the strict regulation under the REIT regime. We provide empirical evidence that is consistent with this hypothesis. Specifically, manipulation strategies may rely on the opportunistic use of leverage. However, manipulation does not appear to be uniform across REIT sectors and seems to become more common as the level of competition in the underlying property sector increases. We employ a set of commonly used traditional performance measures and a recently developed manipulation-proof measure (MPPM, Goetzmann, Ingersoll, Spiegel, and Welch; 2007) to evaluate the performance of 147 REITs from seven different property sectors over the period 1991-2009. Our findings suggest that the existing REIT regulation may fail to mitigate a substantial agency conflict and that investors can benefit from evaluating return information carefully in order to avoid potentially manipulative funds.

Keywords: real estate, performance valuation, manipulation

Suggested Citation

Alcock, Jamie and Glascock, John L. and Steiner, Eva Maria, Manipulation in U.S. REIT Investment Performance Evaluation: Empirical Evidence (September 3, 2013). Journal of Real Estate Finance and Economics, Vol. 47, No. 3, 2013. Available at SSRN: https://ssrn.com/abstract=2320125

Jamie Alcock (Contact Author)

The University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

John L. Glascock

University of Connecticut - School of Business - Center for Real Estate and Urban Economic Studies ( email )

Storrs, CT 06269
United States

European Business School ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, Hessen 65189
Germany

Eva Maria Steiner

Cornell SC Johnson College of Business ( email )

465B Statler Hall
Ithaca, NY 14853
United States

HOME PAGE: http://https://sha.cornell.edu/faculty-research/faculty/ems457/

Register to save articles to
your library

Register

Paper statistics

Abstract Views
838
PlumX Metrics