Real Estate Return Distributions with New NCREIF Data Series

Abstract

The accuracy of real estate return distribution parameter estimation is affected by the tools used to do the work as well as the data sets employed. Consistent with previous studies, investment risk models with infinite variance describe distributions of individual property returns in the new NCREIF Indicators: Capital Performance and Property Operations individual property database over the period 1990–2021. Applying Maximum Likelihood Estimation (MLE) to historic data shows real estate investment risk to be heteroscedastic, but the Characteristic Exponent of the investment risk function varies more among property types than previously reported whether computed by MLE or other estimation techniques.