A Note on the use of Appraisal Data in Indexes of Performance Measurement

S. Michael Giliberto

Real Estate Economics, 1988, vol. 16, issue 1, 77-83

Abstract: This paper demonstrates that even when unbiased appraisals of market value are used in measuring the investment performance of real estate portfolios, a bias in the rate of return or index is present. Further, in the case where the appraisal errors are serially independent, the bias is always positive. The potential for bias in a standard rate of return formula is described. Some implications for portfolio formation and investment manager comparisons are discussed.

Date: 1988
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