REIT Momentum and the Performance of Real Estate Mutual Funds
Posted: 8 Oct 2009
Date Written: October 7, 2009
REITs exhibit a strong and prevalent momentum effect that is not captured by conventional factor models. This REIT momentum anomaly hampers proper judgments about the performance of actively managed REIT portfolios. In contrast, a REIT momentum factor adds incremental explanatory power to performance attribution models for REIT portfolios. Using this factor, this study finds that REIT momentum explains a great deal of the abnormal returns that actively managed REIT mutual funds earn in aggregate. Accounting for exposure to REIT momentum also materially influences cross-sectional comparisons of the performances of REIT mutual funds. This study has important implications for performance evaluation, alpha-beta separation, and manager selection and compensation.
Keywords: Alternative Investments, Real Estate, Equity Investments, Fundamental Analysis and Valuation Models, Performance Measurement and Evaluation, Performance Attribution, Portfolio Management, Equity Strategies
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