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The Journal of Portfolio Management

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Article

Value and Momentum in Commercial Real Estate: A Market-Level Analysis

Eli Beracha and David H. Downs
The Journal of Portfolio Management Special Real Estate Issue 2015, 41 (6) 48-61; DOI: https://doi.org/10.3905/jpm.2015.41.6.048
Eli Beracha
is an assistant professor of real estate at the Tibor and Sheila Hollo School of Real Estate at Florida International University in Miami, FL. eberacha@fiu.edu
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  • For correspondence: eberacha@fiu.edu
David H. Downs
is the Alfred L. Blake Chair of Real Estate and director of The Kornblau Institute at Virginia Commonwealth University in Richmond, VA. dhdowns@vcu.edu
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  • For correspondence: dhdowns@vcu.edu
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Abstract

Value and momentum strategies are widely recognized by capital market portfolio managers, although commercial real estate evidence is limited. In this article, Beracha and Downs apply these strategies in a market-level analysis using NCREIF data from 1986 through 2014. Conducting the analysis at the market-, or MSA-level, illustrates its usefulness to an institutional portfolio manager deciding which markets to target or, potentially, exit. Surprisingly, yet consistent with other asset classes, future returns on commercial real estate are positively correlated with the value effect, as measured by relative cap rate, and positively correlated with relative returnmomentum. Each strategy is robust to risk adjustment and persists over extended investment horizons. As suggested, value and momentum risk factors may benefit institutional investors in establishing benchmarks and monitoring performance.

  • © 2015 Institutional Investor, LLC
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The Journal of Portfolio Management: 41 (6)
The Journal of Portfolio Management
Vol. 41, Issue 6
Special Real Estate Issue 2015
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Value and Momentum in Commercial Real Estate: A Market-Level Analysis
Eli Beracha, David H. Downs
The Journal of Portfolio Management Sep 2015, 41 (6) 48-61; DOI: 10.3905/jpm.2015.41.6.048

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Value and Momentum in Commercial Real Estate: A Market-Level Analysis
Eli Beracha, David H. Downs
The Journal of Portfolio Management Sep 2015, 41 (6) 48-61; DOI: 10.3905/jpm.2015.41.6.048
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