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Manipulation in U.S. REIT Investment Performance Evaluation: Empirical Evidence


We investigate whether Real Estate Investment Trust (REIT) managers actively manipulate performance measures in spite of the strict regulation under the REIT regime. We provide empirical evidence that is consistent with this hypothesis. Specifically, manipulation strategies may rely on the opportunistic use of leverage. However, manipulation does not appear to be uniform across REIT sectors and seems to become more common as the level of competition in the underlying property sector increases. We employ a set of commonly used traditional performance measures and a recently developed manipulation-proof measure (MPPM, Goetzmann et al., Rev Finan Stud 20(5):1503–1546, 2007) to evaluate the performance of 147 REITs from seven different property sectors over the period 1991–2009. Our findings suggest that the existing REIT regulation may fail to mitigate a substantial agency conflict and that investors can benefit from evaluating return information carefully in order to avoid potentially manipulative funds.

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    Note that we run these regressions for the difference in ranking under the Jensen measure and the MPPM only as this difference produces the highest cross-sectional variation, a strategy commonly employed in the literature (Daniel and Titman 2011; Fama and French 1992, 1993; Fama and MacBeth 1973).


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Correspondence to Eva Steiner.

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Alcock, J., Glascock, J. & Steiner, E. Manipulation in U.S. REIT Investment Performance Evaluation: Empirical Evidence. J Real Estate Finan Econ 47, 434–465 (2013).

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  • Real estate
  • Performance evaluation
  • Manipulation