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Market Timing and Investment Selection: Evidence from Real Estate Investors

Published online by Cambridge University Press:  27 December 2017

Yael V. Hochberg  and
Tobias Mühlhofer
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Abstract

We examine commercial real estate fund managers’ abilities to generate abnormal profits through selection of outperforming property submarket segments or through the timing of entry into and exit from submarkets. The vast majority of portfolio managers exhibit little market timing ability, with the exception of non-NYSE real estate investment trusts after the financial crisis. A substantial fraction of managers seems able to successfully select property submarkets. Selection performance exhibits significant persistence. Managers that are active in more liquid markets tend to exhibit better timing performance, while managers exhibiting better selection ability appear to be active in less liquid markets.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 52 , Issue 6 , December 2017 , pp. 2643 - 2675
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2017 

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Footnotes

1

We thank Shaun Bond, Stephen Brown (the editor), Jim Clayton, Jeff Fisher, Barney Hartman-Glaser, Jay Hartzell, Crocker Liu (the referee), Sheridan Titman, Charles Trzcinka, Russ Wermers, and seminar and conference participants at the 2012 Western Finance Association Annual Meetings, the University of California at Berkeley, the University of Texas, Indiana University, the U.S. Securities and Exchange Commission, the University of Cincinnati, Syracuse University, Cornerstone Research, and the 2011 Real Estate Research Institute Annual Conference for helpful discussions and suggestions. We thank the National Council of Real Estate Investment Fiduciaries (NCREIF) for provision of data on private property holdings. Both authors gratefully acknowledge funding from the Real Estate Research Institute. Hochberg additionally acknowledges funding from the Zell Center for Risk Research at Northwestern University. Portions of this research were conducted while Mühlhofer was a visiting faculty member at the University of Texas at Austin. All econometric computations were performed in R (R Development Core Team (2008)).

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