Efficiency, Scale Economies, and the Risk/Return Performance of Real Estate Investment Trusts

Michael Devaney () and William Weber ()

The Journal of Real Estate Finance and Economics, 2005, vol. 31, issue 3, 317 pages

Abstract: Estimates from a directional output distance function are used to construct a risk/return frontier that defines the best-practice management technology for Real Estate Investment Trusts (REITs). We model REIT performance as a production process in which each REIT produces a desirable output (return) and an undesirable output (risk) using inputs of managerial effort and financial capital. The results suggest that ignoring the effects of risk yields a management technology that is significantly different from one that incorporates risk. In addition, market valuation is inversely related to inefficiency and directly related to leverage. Copyright Springer Science + Business Media, Inc. 2005

Keywords: best-practice technology; REIT risk/return; directional distance function (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1007/s11146-005-2791-5

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