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Global real estate mutual funds: regional exposure and forecasting skill

Javier Rodríguez (Graduate School of Business, University of Puerto Rico, San Juan, Puerto Rico)
Herminio Romero (Statistics Institute, University of Puerto Rico, San Juan, Puerto Rico)

International Journal of Managerial Finance

ISSN: 1743-9132

Article publication date: 1 April 2014

467

Abstract

Purpose

The purpose of this paper is to examine the risk-adjusted performance of US-based global real estate mutual funds (GREMFs) with emphasis on their ability to manage their domestic and foreign portfolios exposures.

Design/methodology/approach

The paper applies common econometric measures of portfolio performance and implements a non-traditional methodology called attribution returns to measure forecasting ability. In this setting the paper compares the actual monthly fund return to what would have been earned by the set of indices that best reflects the fund's investment strategy during the previous month. Performance and forecasting ability is examined during two different time periods: 2001-2005 and 2006-2010.

Findings

It is found that global real estate fund managers outperform the market and show good forecasting ability during the 2001-2005 time period. Good forecasting ability translates to positive risk-adjusted performance, as attribution returns are positively correlated with α.

Originality/value

Despite the significant growth in the number of US-based GREMFs and the ample coverage these funds receive in the popular press, few studies are solely devoted to the examination of these funds. In this study the paper empirically examines the ability of fund managers to successfully forecast country/regional political and economic conditions as well as fluctuations in currency exchanges rates brought about by the changes they made to their portfolios’ domestic and foreign exposures.

Keywords

Acknowledgements

JEL Classifications — G11, G15.

Citation

Rodríguez, J. and Romero, H. (2014), "Global real estate mutual funds: regional exposure and forecasting skill", International Journal of Managerial Finance, Vol. 10 No. 2, pp. 168-179. https://doi.org/10.1108/IJMF-02-2012-0018

Publisher

:

Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited

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