Michael Young - Academia.edu (original) (raw)
Papers by Michael Young
Journal of Real Estate Literature, 2017
Journal of Real Estate Research, 1996
Serial dependence of total annual returns in the NCREIF database is shown to be statistically sig... more Serial dependence of total annual returns in the NCREIF database is shown to be statistically significant in the first and fourth quartiles of disaggregated data between 1978 and 1994. More precisely, superior performance is generally followed by continued superior performance, and inferior performance is generally followed by continued inferior performance. In contrast, there is virtually no evidence to support serial dependence in the second or third quartiles, whether combined or taken separately. The empirical rejection of serial independence among real estate returns calls into question the conclusions of research based upon models that incorporate the assumption of serial independence.
Journal of Real Estate Research, 1999
Analysis of more than seven hundred pairs of simultaneous independent appraisals of institutional... more Analysis of more than seven hundred pairs of simultaneous independent appraisals of institutional-grade commercial properties shows that the standard deviation of the random component of appraisal error is approximately two percent. Random appraisal error appears constant across both time and the institutional-grade investment universe, except during infrequent periods of real estate market gridlock. Most appraisal error is deterministic in nature, even though it usually appears random in routine crosssectional analysis. Such appraisal error can be constrained and reduced by investment management control systems. * Null hypothesis rejected at the 5% significance level ** Null hypothesis rejected at the 1% significance level *** Null hypothesis rejected at the 0.1% significance level **** Null hypothesis rejected at the 0.00001% significance level ***** Null hypothesis rejected at the 0.0000001% significance level
Journal of Real Estate Research, 1997
This study examines persistence in relative investment return performance for exchangelisted equi... more This study examines persistence in relative investment return performance for exchangelisted equity Real Estate Investment Trusts (REITs) during the ten-year interval January 1987 through December 1996. Cross-sectional total return data are compiled for monthly, quarterly and annual return sampling frequencies, and are further divided into large-capitalization and small-capitalization subgroups. Because some market observers suggest that the recent crop of equity REITs has different investment characteristics than earlier REIT securities, we also divide the sample interval into two subintervals at the end of 1992 to test whether there are statistically different results for each subinterval. This work extends to liquid markets the results of earlier research by the authors, Young and Graff (1996, 1997), which found statistically significant serial persistence in annual returns from privately held real estate in the NCREIF database. Some researchers have suggested that the surprising persistence reported in those studies is the result of spuriously low observed volatility in appraisal-based returns from privately held real estate due to appraisal smoothing. 1 The discovery in the present study of similar persistence behavior in returns from NYSE and Amex securities should exorcise that criticism. Tests in this study are nonparametric. Serial independence is used to describe asset returns for which return performance in each sample period relative to the REIT investment universe is unrelated to relative return performance in the subsequent sample period. Positive (negative) performance persistence is used to describe asset returns for which return performance in each sample period is more (less) likely to be observed in the subsequent sample period than would be expected if consecutive asset returns were serially independent.
Journal of Real Estate Research, 1997
Investment risk models with infinite variance provide a better description of distributions of in... more Investment risk models with infinite variance provide a better description of distributions of individual property returns in the Property Council of Australia database from 1985 to 1996 than normally distributed risk models. The shape of the distribution of Australian property returns is virtually indistinguishable from the shape of United States property returns in the NCREIF Property Index for the years 1980 to 1992. Australian real estate investment risk is heteroscedastic, like its U.S. counterpart, but the characteristic exponent of the investment risk function is constant across time and property type. It follows that portfolio management and asset diversification techniques that rely upon finitevariance statistics are as ineffectual for the Australian real estate market as they have been found to be for the United States.
Journal of Real Estate Portfolio Management, 2000
Historically, academic research about commercial property investment holding period or tenure has... more Historically, academic research about commercial property investment holding period or tenure has been prescriptive in nature, motivated in large part by the implied "optimal holding period" influenced by differential income tax treatments accorded property types and ownership structures. This empirical study of property sales within the NCREIF database removes income taxes from the equation because the properties were purchased by tax-exempt public and corporate pension plans. We show that 50% of properties
Journal of Real Estate Portfolio Management, 1999
Serial persistence of total annual returns for all properties in the Property Council of Australi... more Serial persistence of total annual returns for all properties in the Property Council of Australia database is shown to be statistically significant in all quartiles of disaggregated returns between 1985 and 1997. More precisely, performance in a particular quartile is generally followed by continued performance in the same quartile. However, when grouped by property type, persistence differences emerge. Office and Retail properties show statistically significant persistence in the extreme (combined first and fourth) quartiles and moderate (combined second and third) quartiles but Industrial properties show serial independence in both the extreme and moderate quartiles. When Office properties are grouped by CBD and non-CBD locations, serial persistence exists in all quartiles for CBD Office properties but not for non-CBD Office properties. The empirical evidence of serial persistence among real estate returns in the Property Council of Australia database challenges the conclusions of research based upon models that incorporate the assumption of serial independence. * * * Null hypothesis rejected at the 0.1% level of significance * * * * Null hypothesis rejected at the 0.
CFA Digest, 1997
Page 1. Performance Persistence in Equity Real Estate Returns by Michael S. Young Vice President ... more Page 1. Performance Persistence in Equity Real Estate Returns by Michael S. Young Vice President and Director of Quantitative Research The RREEF Funds 101 California Street, San Francisco, CA 94111 phone: 415-781 ...
Journal of Real Estate Research, Feb 1, 2002
The Journal of Real Estate Finance and Economics, 1996
Correlation estimates for returns between individual properties are subject to large inherent unc... more Correlation estimates for returns between individual properties are subject to large inherent uncertainties due to limits on the amount of data that is likely to be available for the foreseeable future. After allowance for correlation sampling error, it is impossible to distinguish on an ex ante basis between the risk reduction capabilities of mean-variance portfolio selection models and naive diversification without regard for property type or geographical location. The naive portfolio diversification strategies of typical institutional real estate portfolio managers are rational responses to limitations on the informational content of statistical analyses of historical real estate data.
The Journal of Real Estate Finance and Economics, 2007
In this updated empirical analysis, investment risk models with infinite variance are more descri... more In this updated empirical analysis, investment risk models with infinite variance are more descriptive of distributions of individual property returns in the NCREIF database over the period 1980 to 2003 than Normally distributed risk models. Real estate investment risk is heteroskedastic, but the Characteristic Exponent of the investment risk function is nearly constant across time although differences among property types are evident. Accordingly, asset diversification is far less effective at reducing the impact of non-systematic investment risk on real estate portfolios than in the case of assets with Normally distributed investment risk. The patterns found in the U.S. are the same in Australia and the United Kingdom, and the Characteristic Exponents are virtually identical across all three countries.
The Journal of Real Estate Finance and Economics, 1995
Investment risk models with infinite variance provide a better description of distributions of in... more Investment risk models with infinite variance provide a better description of distributions of individual property returns in the Russell-NCREIF data base over the period 1980 to 1992 than normally distributed risk models. Real estate investment risk is heteroscedastic, but the characteristic exponent of the investment risk function is constant across time and property type. Asset diversification is far less effective at reducing the impact of non-systematic investment risk on real estate portfolios than in the case of assets with normally distributed investment risk. Multi-risk factor portfolio allocation models based on measures of investment codependence from finite-variance statistics are ineffectual in the real estate context.
Journal of Property Research, 2006
Investment risk models with infinite variance provide a better description of distributions of in... more Investment risk models with infinite variance provide a better description of distributions of individual property returns in the IPD U.K. database over the period 1981 to 2003 than normally distributed risk models. This finding mirrors results in the U.S. and Australia using identical methodology. Real estate investment risk is heteroskedastic, but the characteristic exponent of the investment risk function is constant across timeyet it may vary by property type. Asset diversification is far less effective at reducing the impact of non-systematic investment risk on real estate portfolios than in the case of assets with normally distributed investment risk. The results therefore indicate that multi-risk factor portfolio allocation models based on measures of investment codependence from finite-variance statistics are ineffective in the real estate context.
Journal of Property Investment & Finance, 2007
PurposeThe purpose of this paper is to examine individual level property returns to see whether t... more PurposeThe purpose of this paper is to examine individual level property returns to see whether there is evidence of persistence in performance, i.e. a greater than expected probability of well (badly) performing properties continuing to perform well (badly) in subsequent periods.Design/methodology/approachThe same methodology originally used in Young and Graff is applied, making the results directly comparable with those for the US and Australian markets. However, it uses a much larger database covering all UK commercial property data available in the Investment Property Databank (IPD) for the years 1981 to 2002 – as many as 216,758 individual property returns.FindingsWhile the results of this study mimic the US and Australian results of greater persistence in the extreme first and fourth quartiles, they also evidence persistence in the moderate second and third quartiles, a notable departure from previous studies. Likewise patterns across property type, location, time, and holding...
Journal of Real Estate Literature, 2017
Journal of Real Estate Research, 1996
Serial dependence of total annual returns in the NCREIF database is shown to be statistically sig... more Serial dependence of total annual returns in the NCREIF database is shown to be statistically significant in the first and fourth quartiles of disaggregated data between 1978 and 1994. More precisely, superior performance is generally followed by continued superior performance, and inferior performance is generally followed by continued inferior performance. In contrast, there is virtually no evidence to support serial dependence in the second or third quartiles, whether combined or taken separately. The empirical rejection of serial independence among real estate returns calls into question the conclusions of research based upon models that incorporate the assumption of serial independence.
Journal of Real Estate Research, 1999
Analysis of more than seven hundred pairs of simultaneous independent appraisals of institutional... more Analysis of more than seven hundred pairs of simultaneous independent appraisals of institutional-grade commercial properties shows that the standard deviation of the random component of appraisal error is approximately two percent. Random appraisal error appears constant across both time and the institutional-grade investment universe, except during infrequent periods of real estate market gridlock. Most appraisal error is deterministic in nature, even though it usually appears random in routine crosssectional analysis. Such appraisal error can be constrained and reduced by investment management control systems. * Null hypothesis rejected at the 5% significance level ** Null hypothesis rejected at the 1% significance level *** Null hypothesis rejected at the 0.1% significance level **** Null hypothesis rejected at the 0.00001% significance level ***** Null hypothesis rejected at the 0.0000001% significance level
Journal of Real Estate Research, 1997
This study examines persistence in relative investment return performance for exchangelisted equi... more This study examines persistence in relative investment return performance for exchangelisted equity Real Estate Investment Trusts (REITs) during the ten-year interval January 1987 through December 1996. Cross-sectional total return data are compiled for monthly, quarterly and annual return sampling frequencies, and are further divided into large-capitalization and small-capitalization subgroups. Because some market observers suggest that the recent crop of equity REITs has different investment characteristics than earlier REIT securities, we also divide the sample interval into two subintervals at the end of 1992 to test whether there are statistically different results for each subinterval. This work extends to liquid markets the results of earlier research by the authors, Young and Graff (1996, 1997), which found statistically significant serial persistence in annual returns from privately held real estate in the NCREIF database. Some researchers have suggested that the surprising persistence reported in those studies is the result of spuriously low observed volatility in appraisal-based returns from privately held real estate due to appraisal smoothing. 1 The discovery in the present study of similar persistence behavior in returns from NYSE and Amex securities should exorcise that criticism. Tests in this study are nonparametric. Serial independence is used to describe asset returns for which return performance in each sample period relative to the REIT investment universe is unrelated to relative return performance in the subsequent sample period. Positive (negative) performance persistence is used to describe asset returns for which return performance in each sample period is more (less) likely to be observed in the subsequent sample period than would be expected if consecutive asset returns were serially independent.
Journal of Real Estate Research, 1997
Investment risk models with infinite variance provide a better description of distributions of in... more Investment risk models with infinite variance provide a better description of distributions of individual property returns in the Property Council of Australia database from 1985 to 1996 than normally distributed risk models. The shape of the distribution of Australian property returns is virtually indistinguishable from the shape of United States property returns in the NCREIF Property Index for the years 1980 to 1992. Australian real estate investment risk is heteroscedastic, like its U.S. counterpart, but the characteristic exponent of the investment risk function is constant across time and property type. It follows that portfolio management and asset diversification techniques that rely upon finitevariance statistics are as ineffectual for the Australian real estate market as they have been found to be for the United States.
Journal of Real Estate Portfolio Management, 2000
Historically, academic research about commercial property investment holding period or tenure has... more Historically, academic research about commercial property investment holding period or tenure has been prescriptive in nature, motivated in large part by the implied "optimal holding period" influenced by differential income tax treatments accorded property types and ownership structures. This empirical study of property sales within the NCREIF database removes income taxes from the equation because the properties were purchased by tax-exempt public and corporate pension plans. We show that 50% of properties
Journal of Real Estate Portfolio Management, 1999
Serial persistence of total annual returns for all properties in the Property Council of Australi... more Serial persistence of total annual returns for all properties in the Property Council of Australia database is shown to be statistically significant in all quartiles of disaggregated returns between 1985 and 1997. More precisely, performance in a particular quartile is generally followed by continued performance in the same quartile. However, when grouped by property type, persistence differences emerge. Office and Retail properties show statistically significant persistence in the extreme (combined first and fourth) quartiles and moderate (combined second and third) quartiles but Industrial properties show serial independence in both the extreme and moderate quartiles. When Office properties are grouped by CBD and non-CBD locations, serial persistence exists in all quartiles for CBD Office properties but not for non-CBD Office properties. The empirical evidence of serial persistence among real estate returns in the Property Council of Australia database challenges the conclusions of research based upon models that incorporate the assumption of serial independence. * * * Null hypothesis rejected at the 0.1% level of significance * * * * Null hypothesis rejected at the 0.
CFA Digest, 1997
Page 1. Performance Persistence in Equity Real Estate Returns by Michael S. Young Vice President ... more Page 1. Performance Persistence in Equity Real Estate Returns by Michael S. Young Vice President and Director of Quantitative Research The RREEF Funds 101 California Street, San Francisco, CA 94111 phone: 415-781 ...
Journal of Real Estate Research, Feb 1, 2002
The Journal of Real Estate Finance and Economics, 1996
Correlation estimates for returns between individual properties are subject to large inherent unc... more Correlation estimates for returns between individual properties are subject to large inherent uncertainties due to limits on the amount of data that is likely to be available for the foreseeable future. After allowance for correlation sampling error, it is impossible to distinguish on an ex ante basis between the risk reduction capabilities of mean-variance portfolio selection models and naive diversification without regard for property type or geographical location. The naive portfolio diversification strategies of typical institutional real estate portfolio managers are rational responses to limitations on the informational content of statistical analyses of historical real estate data.
The Journal of Real Estate Finance and Economics, 2007
In this updated empirical analysis, investment risk models with infinite variance are more descri... more In this updated empirical analysis, investment risk models with infinite variance are more descriptive of distributions of individual property returns in the NCREIF database over the period 1980 to 2003 than Normally distributed risk models. Real estate investment risk is heteroskedastic, but the Characteristic Exponent of the investment risk function is nearly constant across time although differences among property types are evident. Accordingly, asset diversification is far less effective at reducing the impact of non-systematic investment risk on real estate portfolios than in the case of assets with Normally distributed investment risk. The patterns found in the U.S. are the same in Australia and the United Kingdom, and the Characteristic Exponents are virtually identical across all three countries.
The Journal of Real Estate Finance and Economics, 1995
Investment risk models with infinite variance provide a better description of distributions of in... more Investment risk models with infinite variance provide a better description of distributions of individual property returns in the Russell-NCREIF data base over the period 1980 to 1992 than normally distributed risk models. Real estate investment risk is heteroscedastic, but the characteristic exponent of the investment risk function is constant across time and property type. Asset diversification is far less effective at reducing the impact of non-systematic investment risk on real estate portfolios than in the case of assets with normally distributed investment risk. Multi-risk factor portfolio allocation models based on measures of investment codependence from finite-variance statistics are ineffectual in the real estate context.
Journal of Property Research, 2006
Investment risk models with infinite variance provide a better description of distributions of in... more Investment risk models with infinite variance provide a better description of distributions of individual property returns in the IPD U.K. database over the period 1981 to 2003 than normally distributed risk models. This finding mirrors results in the U.S. and Australia using identical methodology. Real estate investment risk is heteroskedastic, but the characteristic exponent of the investment risk function is constant across timeyet it may vary by property type. Asset diversification is far less effective at reducing the impact of non-systematic investment risk on real estate portfolios than in the case of assets with normally distributed investment risk. The results therefore indicate that multi-risk factor portfolio allocation models based on measures of investment codependence from finite-variance statistics are ineffective in the real estate context.
Journal of Property Investment & Finance, 2007
PurposeThe purpose of this paper is to examine individual level property returns to see whether t... more PurposeThe purpose of this paper is to examine individual level property returns to see whether there is evidence of persistence in performance, i.e. a greater than expected probability of well (badly) performing properties continuing to perform well (badly) in subsequent periods.Design/methodology/approachThe same methodology originally used in Young and Graff is applied, making the results directly comparable with those for the US and Australian markets. However, it uses a much larger database covering all UK commercial property data available in the Investment Property Databank (IPD) for the years 1981 to 2002 – as many as 216,758 individual property returns.FindingsWhile the results of this study mimic the US and Australian results of greater persistence in the extreme first and fourth quartiles, they also evidence persistence in the moderate second and third quartiles, a notable departure from previous studies. Likewise patterns across property type, location, time, and holding...