How Does Appraisal Smoothing Bias Real Estate Returns Measurement?
Posted: 22 Aug 2005
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.
Keywords: Appraisal smoothing, error aggregation, real estate returns
Suggested Citation: Suggested Citation
Edelstein, Robert H. and Quan, Daniel C., How Does Appraisal Smoothing Bias Real Estate Returns Measurement?. Journal of Real Estate Finance and Economics, Vol. 32, No. 1, 2006, Available at SSRN: https://ssrn.com/abstract=782329
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