Characteristics of German Real Estate Return Distributions: Evidence from Germany and Comparison to the U.S. and U.K

By Maurer, Raimond; Reiner, Frank et al. | Journal of Real Estate Portfolio Management, January-April 2004 | Go to article overview

Characteristics of German Real Estate Return Distributions: Evidence from Germany and Comparison to the U.S. and U.K


Maurer, Raimond, Reiner, Frank, Sebastian, Steffen, Journal of Real Estate Portfolio Management


Executive Summary. In contrast to the United States and the United Kingdom, little empirical work exists about the distributional characteristics of appraisalbased real estate returns outside these countries. The purpose of this study is to fill this gap by focusing on Germany. In line with other studies, this paper offers an extensive investigation into the distribution of German real estate returns and compares them with and U.S. and U.K. data in the same period. Furthermore, the comovements with bonds and stocks are also examined. In the core, the distributional characteristics for German real estate are comparable to that for the U.S. and U.K.

Introduction

As empirical research suggests, the characteristics of real estate return distributions are significantly different from those of financial assets, like bonds and stocks (e.g., Sirmans and Sirmans, 1987; Fletcher, 1995; Norman, Sirmans and Benjamin, 1995: Stevenson, 2000; and Benjamin, Sirmans and Zietz, 2001). In general, real estate is seen as an investment vehicle providing a low return variability and downside risk with respect to certain target returns. For example, there is a general belief that real estate is an effective vehicle to protect investors from the risk of inflationary erosion, which is particularly important for long-term pension investments. In addition, there is a clear consensus in the literature that real estate returns exhibit low co-movement and a counter-cyclical performance with bond and stock markets. Furthermore, as Newell and Webb (1996) pointed out, real estate returns exhibit significant positive serial correlation, which is in marked contrast to the generally insignificant autocorrelation structure in the stock and bond markets. Due to these specific risk and return characteristics, property investments were shown to be beneficial in reducing the risk, as well as in diversifying international mixedasset portfolios.

Most of the empirical work towards the estimation of the return generating process of real estate investments has focused on analyzing time series of return indices for the United States and the United Kingdom. In particular, the indices developed by the National Council of Real Estate Investment Fiduciaries (NCREIF) for the U.S., and by the Investment Property Databank (IPD) for the U.K. are used extensively throughout the literature. Both types of indices are constructed by aggregating the return of individual incomeproducing commercial properties held by institutional investors, such as mutual funds, insurance companies and pension funds. To estimate the capital gains portion of the total return, it is common practice to use appraisal values for individual properties. There is a general belief in the literature that using appraised values in conjunction with, and in aggregation across, a number of properties to construct an index may lead to a smoothing effect, which understates the volatility of the underlying true process of real estate returns (see, among others, Ross and Zisler, 1991; Geltner, 1989, 1993; and Brown and Matysiak, 2000).

In contrast to the U.S. and the U.K., there is comparatively little empirical work on the distributional characteristics of real estate returns outside these countries. This is mainly due to the poor availability of adequate time series. The purpose of this study is to fill this gap by focusing the characteristics of real estate return distributions for Germany. In line with other studies concerning the characteristics of appraisal-based real estate return distributions (e.g., Myer and Webb, 1994; Young, 1994; Young and Graff, 1995; and Graff, Harrington and Young, 1997), this study conduced a rigorous and extensive investigation into the distribution of German commercial real estate returns and compared them with U.K. and U.S. data over the same period. Furthermore, the comovements with return series of financial assets (i.e., bonds and stocks) have also been examined.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Characteristics of German Real Estate Return Distributions: Evidence from Germany and Comparison to the U.S. and U.K
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.