Evaluating the Sharpe performance of the Australian property investment markets

Lee, S and Higgins, D 2009, 'Evaluating the Sharpe performance of the Australian property investment markets', Pacific Rim Property Research Journal, vol. 15, no. 3, pp. 358-370.


Document type: Journal Article
Collection: Journal Articles

Title Evaluating the Sharpe performance of the Australian property investment markets
Author(s) Lee, S
Higgins, D
Year 2009
Journal name Pacific Rim Property Research Journal
Volume number 15
Issue number 3
Start page 358
End page 370
Total pages 13
Publisher Pacific Rim Real Estate Journal
Abstract The Sharpe performance is a commonly recognised measure for comparing the risk adjusted returns of competing investment classes. On the surface, Australian property investment markets, display good Sharpe performances with relatively solid returns and low risk profiles. However, the Sharpe performance formula neglects two important features typically displayed by appraisal based property returns: Non-normality and autocorrelation. These both can lead to an underestimation of the true risk of direct property and so an overestimation of the associated Sharpe performance. On applying a number of adjustments to the traditional Sharpe ratio, this research examines the joint effects that autocorrelation and non-normality have on the risk-adjusted performance of direct property in comparison with shares and bonds. The reults indicate that overall direct property still maintains its attractiveness and ranking even after the effects of non-normailty and autocorrelation are taken into account.
Subject Building Construction Management and Project Planning
Real Estate and Valuation Services
Investment and Risk Management
Keyword(s) property finance
investment appraisal
real estate
ISSN 1444 8921
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