Persistence of UK real estate returns: A Markov chain analysis

Authors: Lee, S L1; Ward, C W R2

Source: Journal of Asset Management, Volume 1, Number 3, 1 January 2001 , pp. 279-291(13)

Publisher: Palgrave Macmillan

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The persistence of investment performance is a topic of perennial interest to investors. Efficient Markets theory tells us that past performance cannot be used to predict future performance, yet investors appear to be influenced by the historical performance in making their investment allocation decisions. The problem has been of particular interest to investors in real estate; not least because reported returns from investment in real estate are serially correlated thus implying some persistence in investment performance. This paper applies the established approach of Markov chain analysis to investigate the relationship between past and present performance of UK real estate over the period 1981–96. The data are analysed by sector, region and size. Furthermore, some variations in investment performance classification are reported, and the results are shown to be robust.Journal of Asset Management (2001) 1, 279–291; doi:10.1057/palgrave.jam.2240022

Document Type: Research Article


Affiliations: 1: 1Department of Land Management, The University of Reading, Whiteknights, Reading, RG6 6AW, UK., Tel: +44 (0) 118 931 6338, Fax: +44 (0) 118 931 8172, Email: 2: 2Professor of Property Investment and Finance at the University of Reading

Publication date: January 1, 2001

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