A Note on the Effect of Transactions Costs on Real Estate Investment Return

Michael J. Sullivan (), Steven M. Cassidy and Charles M. Ermer
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Michael J. Sullivan: College of Business and Economics 4505 Maryland Parkway University of Nevada-Las Vegas Las Vegas, Nevada 89154-6008, http://cob.nevada.edu/Cob_www/
Steven M. Cassidy: School of Business Howard University Washington, D.C. 20059, http://www.bschool.howard.edu/
Charles M. Ermer: School of Business Howard University Washington, D.C. 20059, http://www.bschool.howard.edu/

Journal of Real Estate Research, 1991, vol. 6, issue 1, 113-117

Abstract: In this paper we develop a model that demonstrates the effect of transaction costs on measuring returns to real estate. Our model reveals that studies not adjusting for transaction costs will overstate risk-adjusted returns. Accordingly, at least part of the reported mean-variance superiority of real estate over investments in corporate or government securities may be due to failing to consider transaction costs. We also illustrate the extent to which the inclusion of transaction costs equalizes mean-variance for investments in real estate and securities.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 1991
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