Holding periods and investment performance: analysing UK office returns 1983-2003

Drawing on a unique database of office properties constructed for Gerald Eve by IPD, this paper examines the holding periods of individual office properties sold between 1983 and 2003. It quantifies the holding periods of sold properties and examines the relationship between the holding period and investment performance. Across the range of holding periods, excess returns (performance relative to the market) are evenly distributed. There are as many winners as there are losers. The distribution of excess returns over different holding periods is widely spread with the risk of under-performance greater over short holding periods. Over the longer term, excess performance is confined to a narrow range and individual returns are more likely to perform in line with the market as a whole

Drivers of Fund Performance: A Panel Data Analysis

The principle aim of this research is to elucidate the factors driving the total rate of return of non-listed funds using a panel data analytical framework. In line with previous results, we find that core funds exhibit lower yet more stable returns than value-added and, in particular, opportunistic funds, both cross-sectionally and over time. After taking into account overall market exposure, as measured by weighted market returns, the excess returns of value-added and opportunity funds are likely to stem from: high leverage, high exposure to development, active asset management and investment in specialized property sectors. A random effects estimation of the panel data model largely confirms the findings obtained from the fixed effects model. Again, the country and sector property effect shows the strongest significance in explaining total returns. The stock market variable is negative which hints at switching effects between competing asset classes. For opportunity funds, on average, the returns attributable to gearing are three times higher than those for value added funds and over five times higher than for core funds. Overall, there is relatively strong evidence indicating that country and sector allocation, style, gearing and fund size combinations impact on the performance of unlisted real estate funds.unlisted real estate funds, performance analysis, commercial real estate, panel data analysis

Systematic Property Risk: Quantifying UK Property Betas 1983-2005

The increased frequency in reporting UK property performance figures, coupled with the acceptance of the IPD database as the market standard, has enabled property to be analysed on a comparable level with other more frequently traded assets. The most widely utilised theory for pricing financial assets, the Capital Asset Pricing Model (CAPM), gives market (systematic) risk, beta, centre stage. This paper seeks to measure the level of systematic risk (beta) across various property types, market conditions and investment holding periods. This paper extends the authors’ previous work on investment holding periods and how excess returns (alpha) relate to those holding periods. We draw on the uniquely constructed IPD/Gerald Eve transactions database, containing over 20,000 properties over the period 1983-2005. This research allows us to confirm our initial findings that properties held over longer periods perform in line with overall market performance. One implication of this is that over the long-term performance may be no different from an index tracking approach.Real Estate, Risk, Property, Betas

The bi-Poisson process: a quadratic harness

This paper is a continuation of our previous research on quadratic harnesses, that is, processes with linear regressions and quadratic conditional variances. Our main result is a construction of a Markov process from given orthogonal and martingale polynomials. The construction uses a two-parameter extension of the Al-Salam--Chihara polynomials and a relation between these polynomials for different values of parameters.Comment: Published in at http://dx.doi.org/10.1214/009117907000000268 the Annals of Probability (http://www.imstat.org/aop/) by the Institute of Mathematical Statistics (http://www.imstat.org

Stochastic forecast of the population of Poland, 2005-2050

Forecasting the population of Poland is very challenging. Firstly, the country has been undergoing rapid demographic changes. In the 1990s, they were influenced by the political, economic, and social consequences of the collapse of the communist regime. Since 2004 they have been shaped by Poland’s entry into the European Union. Secondly, the availability of statistics for Poland on past trends is strongly limited. The resulting high uncertainty of future trends should be dealt with systematically, which is an essential part of the stochastic forecast presented in this paper. The forecast results show that the Polish population will constantly decline during the next decades and Poland will face significant ageing as indicated by a rising old-age dependency-ratio. There is a probability of 50 % that in 2050 the population will number between 27 and 35 millions compared to 38.2 in 2004 and that there will be at least 63 persons aged 65+ per 100 persons aged 19-64.Poland, predictive distributions, stochastic forecast, uncertainty

Is Poland really 'immune' to the spread of cohabitation?

Various data have constantly pointed out a low incidence of non-marital unions in Poland (at 1.4-4.9% among all unions). In this paper we demonstrate that these data, coming exclusively from cross-sectional surveys, clearly underestimate the scale of the phenomenon. By exploiting data on partnership histories we show that young Poles have increasingly opted for cohabitation. Consequently, in the years 2004-2006, entries to cohabitation constituted about one third of all first union entries. Consensual unions have traditionally been seen as being more widespread among the lower social strata, but a clear increase in cohabitation has been also been recently observed among groups with higher levels of educational attainment. Although the estimates of cohabitation incidence are far below those observed in Northern and Western Europe, our study suggests that Poland is not as ‘immune’ to the spread of consensual unions as it is commonly believed.cohabitation, Poland, union formation

Drivers of fund performance: a panel data analysis

The principle aim of this research is to elucidate the factors driving the total rate of return of non-listed funds using a panel data analytical framework. In line with previous results, we find that core funds exhibit lower yet more stable returns than value-added and, in particular, opportunistic funds, both cross-sectionally and over time. After taking into account overall market exposure, as measured by weighted market returns, the excess returns of value-added and opportunity funds are likely to stem from: high leverage, high exposure to development, active asset management and investment in specialized property sectors. A random effects estimation of the panel data model largely confirms the findings obtained from the fixed effects model. Again, the country and sector property effect shows the strongest significance in explaining total returns. The stock market variable is negative which hints at switching effects between competing asset classes. For opportunity funds, on average, the returns attributable to gearing are three times higher than those for value added funds and over five times higher than for core funds. Overall, there is relatively strong evidence indicating that country and sector allocation, style, gearing and fund size combinations impact on the performance of unlisted real estate funds

An evaluation of the performance of UK real estate forecasters

Given the significance of forecasting in real estate investment decisions, this paper investigates forecast uncertainty and disagreement in real estate market forecasts. It compares the performance of real estate forecasters with non-real estate forecasters. Using the Investment Property Forum (IPF) quarterly survey amongst UK independent real estate forecasters and a similar survey of macro-economic and capital market forecasters, these forecasts are compared with actual performance to assess a number of forecasting issues in the UK over 1999-2004, including forecast error, bias and consensus. The results suggest that both groups are biased, less volatile compared to market returns and inefficient in that forecast errors tend to persist. The strongest finding is that forecasters display the characteristics associated with a consensus indicating herding