How Does Appraisal Smoothing Bias Real Estate Returns Measurement?

How Does Appraisal Smoothing Bias Real Estate Returns Measurement? This paper examines and clarifies several related issues about real estate return indexes. Specifically, even if real estate valuation smoothing exists at the individual property level, such errors may offset in the aggregate. Using data from commercial property appraisals and corresponding transactions, appraisal smoothing errors engender an underestimation of both the first and second moments for real estate returns. After correcting for these “underestimations,” real estate mean returns and the variance appear to be quite similar to those of stocks. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

How Does Appraisal Smoothing Bias Real Estate Returns Measurement?

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2006 by Springer Science + Business Media, Inc.
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-005-5177-9
Publisher site
See Article on Publisher Site

Abstract

This paper examines and clarifies several related issues about real estate return indexes. Specifically, even if real estate valuation smoothing exists at the individual property level, such errors may offset in the aggregate. Using data from commercial property appraisals and corresponding transactions, appraisal smoothing errors engender an underestimation of both the first and second moments for real estate returns. After correcting for these “underestimations,” real estate mean returns and the variance appear to be quite similar to those of stocks.

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: Feb 1, 2006

References

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