REIT Momentum and the Performance of Real Estate Mutual Funds
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.
Derwall, J., Huij, J.J., & Marquering, W.A.. (2009). REIT Momentum and the Performance of Real Estate Mutual Funds. Financial Analysts Journal, 65(5), 24–34. Retrieved from http://hdl.handle.net/1765/20955