Robust Desmoothed Real Estate Returns

65 Pages Posted: 28 Jun 2019

See all articles by Jean-Christophe Delfim

Jean-Christophe Delfim

University of Geneva - Geneva School of Economics and Management

Martin Hoesli

University of Geneva - Geneva School of Economics and Management (GSEM); Swiss Finance Institute; University of Geneva - Research Center for Statistics; University of Aberdeen - Business School

Date Written: June 13, 2019

Abstract

This research starts from the observation that common desmoothing models are likely to generate some extreme returns. Such returns will distort risk measurement and hence can lead to investment decisions that are suboptimal relative to those that would be made if a transaction based index were available. Thus, we propose to improve the desmoothing models by incorporating a robust filter into the procedure. We report that in addition to properly treating for smoothing, the method prevents the occurrence of extreme values. As shown with U.S. data, our method leads to desmoothed series whose characteristics are akin to those of transaction-based indices.

Keywords: Desmoothing models; Robust filter; Appraisal-based index; Private real estate; Unlevered REITs

JEL Classification: C32, C61, G10, R33

Suggested Citation

Delfim, Jean-Christophe and Hoesli, Martin Edward Ralph, Robust Desmoothed Real Estate Returns (June 13, 2019). Swiss Finance Institute Research Paper No. 19-32, June 2019. Available at SSRN: https://ssrn.com/abstract=3403691 or http://dx.doi.org/10.2139/ssrn.3403691

Jean-Christophe Delfim

University of Geneva - Geneva School of Economics and Management ( email )

Uni Mail
Bd du Pont-d'Arve 40
Geneva, 1211
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Martin Edward Ralph Hoesli (Contact Author)

University of Geneva - Geneva School of Economics and Management (GSEM) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, 1211
Switzerland
+41 22 379 8122 (Phone)
+41 22 379 8104 (Fax)

Swiss Finance Institute

c/o University of Geneva
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CH-1211 Geneva 4
Switzerland

University of Geneva - Research Center for Statistics ( email )

Geneva
Switzerland

University of Aberdeen - Business School ( email )

Edward Wright Building
Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom
+41 22 379 8122 (Phone)
+41 22 379 8104 (Fax)

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