The German Open-End Fund Crisis – A Valuation Problem?
Christian Weistroffer · Steffen Sebastian
Published online: 19 December 2014

Abstract

Using a unique dataset of appraised values and transaction prices, this
paper investigates whether systematic over-appraisals could have been at the heart
of the 2005/2006 German open-end fund crisis. Because sold properties are valued
more closely to market values than unsold properties, we develop a hedonic pricing
model that controls for sample selectivity. The resulting estimates of prices achievable
in the market are then compared to appraised values. Our results show that the
properties held by open-end real estate funds were likely to have been overvalued
prior to the crisis. This supports the view that a fundamentally justified run was at the
heart of the 2005/2006 crisis, and it challenges the effectiveness of current valuation
practices.

Performance Chasing, Fund Flows and Fund Size
in Real Estate Mutual Funds
Wen-Hsiu Chou & William G. Hardin III
Published online: 8 October 2013

Abstract

Real estate mutual funds have grown dramatically in number, size, scope and
assets under management over the last 15 years, but little assessment is evident. The
present study addresses this limitation. Better prior period performance is associated with
greater shares of fund inflows for a period. Returns, however, are negatively associated
with increased fund flows and fund size. Investors chase past performance limiting fund
managers’ ability to optimize investments. Under normal market conditions, but
departing fromtypicalmutual fund performance, real estatemutual fund returns generally
exceed relevant benchmarks on a before expenses basis and match benchmark returns
after expenses. The ability to meet and exceed benchmark returns, however, does not
hold during the financial crisis period. Overall, more established funds are hown to have
higher returns while fund turnover is not a determinant of returns.

COMMERCIAL PROPERTY PRICE INDEXES
AND THE SYSTEM OF NATIONAL ACCOUNTS
W. Erwin Diewert
University of British Columbia and UNSW
Kevin J. Fox*
UNSW
Chihiro Shimizu National University of Singapore

Abstract.

This paper studies the problems associated with the construction of price indexes for commercial properties that could be used in the System of National Accounts (SNA). Property price indexes are required for the stocks of commercial properties in the Balance Sheets of the country. Related service price indexes for the land and structure input components of a commercial property are required in the Production Accounts of the country if the Multifactor Productivity of the Commercial Property Industry is calculated as part of the SNA. The paper reviews existing methods for constructing an overall Commercial Property Price Index (CPPI) and concludes that mostmethods are biased (due to their neglect of depreciation) and more importantly, not able to provide separate
land and structure subindexes. A class of hedonic regression models that is not subject to these problems is discussed.

Correlation Dynamics and Determinants in International Securitized Real Estate
Markets

Kim Hiang Liow,* Xiaoxia Zhou** and Qing Ye***

We find the correlation movements among eight developed securitized real estate markets and among their stock markets are quite synchronized over the period from 1995 through 2012. There is a high degree of correlation dependence with many of the realized correlation series subject to regime switching.
Moreover, international correlations of public property returns could be significantly
explained by five real estate variables that include global real estate securities market volatility, co-existence of real estate investment trust (REIT) influence, underlying direct real estate return performance differential, real estate securities volatility differential and real estate securities market size differential after controlling for macroeconomic influence and stock market effect. The importance of the control and real estate variables in explaining the return correlations varies across the economies examined.