A systematic study of real estate core funds : herd behavior and performance attribution analysis

The returns and portfolio characteristics of core funds were tested for evidence of herd behavior and performance relative to the NCREIF Property Index (NPI), using a proprietary database that included data from 1985 to 2004. Tests performed include descriptive statistics, regression analysis, and attribution analysis. Results indicate that herd behavior tends to be somewhat correlated with the NPI return. Through our disaggregate (fund specific) analysis, we find that herd behavior, where managers base investment decisions on the collective actions of the market rather than their individual beliefs, may be present in the core fund industry. Regression analysis suggests that herding appears to be positively correlated with fund size and negatively correlated to leverage, fees, and persistence from the one-year lag of the deviation from the mean. Performance analysis results indicate that although fund leverage has increased significantly over time, the use of debt has produced little or no additional return to investors. We found that across funds, net returns to real estate fall short of the NPI, and that across time, there is a negative correlation between the performance of the index and fund performance relative to the index.

Department dc:contributor.department

Massachusetts Institute of Technology. Center for Real Estate

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2005

Authors dc:creator

• Kwong, Valerie, S.M. Massachusetts Institute of Technology
• Robison, George Ryan

Advisor dc:contributor.advisor

• David M. Geltner.

• Architecture.
• Urban Studies and Planning.
• Center for Real Estate.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/59518

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/59518