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Return Patterns of German Open-End Real Estate Funds

An Empirical Explanation of Smooth Fund Returns


Sebastian Gläsner

The aim of this study is to better understand stable capital growth of German properties and to contribute to the explanation of stable fund returns. In the course of the investigation, evidence is found that both phenomena are interrelated. All analyses are based on publicly available data; therefore they are not limited by client interests. Results show three different pieces of evidence on return smoothing, namely the influence on valuation, the timing of valuations, and the influence on returns resulting in return differences by calendar months. Together with the notion of internationally uniquely stable returns, it seems impossible to extract true asset volatility from the observed appraisal-based time series.


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tDERV Delta estimated rental value in period t tDMV Delta market value in period t tDOCR Delta occupancy rate in period t tDYP Delta year’s purchase in period t tMV Market value in period t tOCR Occupancy rate in period t rateoccupancy. Occupancy rate leasesendingperc .. Percentage of ending leases by rental value within the next year tR Return in month t RVG Rental value growth * tV Value of property at time t purchaseofyear .. Year of the acquisition of the property by the fund YP Year’s purchase or rent multiplier Feba2 Dummy variable taking the value of 1 for the month Febru- ary Deca12 Dummy variable taking the value of 1 for the month De- cember Random error term Quantile of the quantile regression function

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