An Assessment of the Impact of Valuation Error on Property Investment Performance Measurement

G. Bowles, P. McAllister, H. Tarbert

Research output: Contribution to journalArticle

Abstract

Analyses the effect of valuation error on the implied precision of investment performance measurement of property assets. A prerequisite for measuring the absolute or relative performance of commercial property investments is that valuations provide a reliable proxy for prices. However, there are conceptual and empirical grounds to suggest that uncertainty is inherent in the valuation process. This is primarily due to the structure of the commercial property market and the techniques and guidelines of the property valuation process. Sampling theory is used to measure portfolio valuation error confidence bands for hypothetical property investment portfolios based on different assumptions concerning assumed levels of valuation error, size of portfolio and number of measurement time periods. It is concluded that, for the majority of investment portfolios, property investment performance measures will include some uncertainty and thus the property fund manager should be sceptical of the implied precision in reported measures of return.

Original languageEnglish
Pages (from-to)139-156
Number of pages18
JournalJournal of Property Investment and Finance
Volume19
Issue number2
DOIs
Publication statusPublished - 2001
Externally publishedYes

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Investment performance
Performance measurement
Property investment
Investment portfolio
Uncertainty
Time measurement
Relative performance
Assets
Sampling
Performance measures
Fund managers
Confidence
Property market

Keywords

  • Valuation
  • Property Management
  • Sampling
  • Theory
  • Investment Property Portfolio

Cite this

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An Assessment of the Impact of Valuation Error on Property Investment Performance Measurement. / Bowles, G.; McAllister, P.; Tarbert, H.

In: Journal of Property Investment and Finance, Vol. 19, No. 2, 2001, p. 139-156.

Research output: Contribution to journalArticle

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