Search

Purpose--Aims to test to determine whether the selection of the historical return time interval (monthly, quarterly, semiannual, or annual) used for calculating real estate investment trust (REIT) returns has a significant effect on optimal portfolio allocations. Design/methodology/approach--Using a mean-variance utility function, optimal allocations to portfolios of stocks, bonds, bills, and REITs across different levels of assumed investor risk aversion are calculated. The average historical returns, standard deviations, and correlations (assuming different time intervals) of the various asset classes are used as mean-variance inputs. Results are also compared using more recent data, since 1988, with, data from the full REIT history, which goes back to 1972. Findings--Using the more recent REIT datarather than the full dataset results in optimal allocations to REITs that are considerably higher. Likewise, using monthly and quarterly returns tends to understate the variability of REITs and leads to higher portfolio allocations. Research limitations/implications--The results of this study are based on the limited historical return data that are currently available for REITs. The results of future time periods may not prove to be consistent with the findings. Practical implications--Numerous research papers arbitrarily decide to employ monthly or quarterly returns in their analyses to increase the number of REIT observations they have available. These shorter interval returns are generally annualized. This paper addresses the consequences of those decisions. Originality/value--It has been shown that the decision to use return estimation intervals shorter than a year does have dramatic consequences on the results obtained and, therefore, must be carefully considered and justified. Keywords Assets management, Real estate, Returns Paper type Research paper

Purpose--This study seeks to examine the market returns of five domestic real estate investment trust (REIT) indices to determine whether they exhibit a turn-of-the-month (TOM) effect. Design/methodology/approach--A test is carried out for the TOM effect by employing a battery of parametric and non-parametric statistical tests that address the concerns of distributional assumption violations. An OLS regression model compares the TOM returns with the rest-of-themonth (ROM) returns and an ANOVA model examines the TOM period while controlling for monthly seasonalities. A non-parametric t-test examines whether the TOM returns are greater than the ROM returns and a Wilcoxon signed rank test examines the matched-pairs of TOM and ROM returns. Findings--A TOM effect in all five domestic REIT indices is found: real estate 50 REIT, all-REIT, equity REIT, hybrid REIT, and mortgage REIT. More specifically, the six-day TOM period, on average, accounts for over 100 per cent of the monthly return for the three non-mortgage REITs, while the ROM period generates a negative return. Additionally, the TOM returns are greater than the ROM returns in 75 per cent of the months. Research limitations/implications--The data are limited to five-years of daily returns and five different indices. Thus, the results could be biased on the selected time period. Practical implications--These results are important to REIT portfolio managers and investors. Domestic REIT markets experience a TOM effect from which investors and portfolio managers can benefit. Orginality/value--The daily returns of all five major domestic REIT indices are examined. Data are evaluated which include daily returns after the passage of the REIT Modernization Act of 1999 that resulted in numerous changes for REITs. Whether the TOM effect can be detected with both parametric and non-parametric tests is examined. Keywords Real estate, Investment funds, Calendar events Paper type Research paper

Purpose--The purpose of this paper is to analyze the effects of individual manager characteristics on real estate mutual fired (REMF) performance. Human capital theory predicts that factors like education, experience and professional certifications improve skill sets and thus performance. Conversely, capital markets theory suggests that these things may be irrelevant in the management of mutual funds. Design/methodology/approach A total of 63 REMFs were sampled over the period 2001-2003 and equations were estimate regressing, alternatively, risk-adjusted return, market risk and management fees on a series of fund variables and manager characteristics including the manager's tenure, whether the fund manager holds a professional certification, whether the manager has specific real estate experience, and whether the fund is team-managed. Findings--Modest evidence is found that team-managed funds have lower risk-adjusted returns than solo-managed funds. Managers with longer tenure tend to pursue higher market risk levels, and there is no relation between manager characteristics and management fees. Research limitations/implications--This study considers only one cross-sectional time period. Future research might use longitudinal data. Practical implications--Despite real estate being a specialized field of finance, there is little if any support for the predictions of human capital theory that experience, education and training result in greater performance among managers of REMFs. Originality/value--This paper extends prior work in mutual fund management characteristics and fund performance to real estate funds. Keywords Real estate, Managers, Human capital, Market economy Paper type Research paper

Internal rate of return (IRR) and modified internal rate of return (MIRR) are two capital budgeting strategies which guarantee optimal results when evaluating the feasibility and profitability of on-going projects and divisions. Although the two techniques are relatively the same, MIIR is more preferable since it generates more accurate reinvestment rate projections. Experts claim that continuance decisions and profitability determination can be made more accurate if NPV is evaluated over a specific period of time.

Purpose--Aims to explain the rationale for producing an issue on the topic of real estate investing and how these articles fit together. Design/methodology/approach--Essay format. Findings--Real estate is probably the largest category of assets for investors and the works in this issue will assist in the decision making processes of real estate investors. Research limitations/implications--Each of these papers covers only a limited topic and more research in the area is needed. Practical implications--These papers could change how assets allocation studies are conducted; allow investors to make superior returns around the turn of the month on real estate investment trusts (REITs); alter the capital structure of REITs; seek out real estate mutual funds with higher management fees (because they were associated with higher returns); invest directly in real estate properties. Keywords Real estate, Assets management, Investment Paper type Viewpoint