An Empirical Analysis of the Performance of Residential Real Estate Investment Funds

Abstract

Real estate investment trusts (REITs) provide a mechanism through which investors can participate in the real estate market with liquidity and transparency. In this study, we benchmark the performance of 11 residential REITs for the period 2009–2013. The study tracks the performance of residential REITs through the economic crisis period. The data envelopment analysis (DEA) model uses well-performing units (efficiency of 1% or 100%) that are closest to the underperforming unit on the efficiency frontier as a “role model” (peer units) for the underperforming unit. In addition, the DEA model also calculates by how much a nonperforming unit should increase the output level or decrease the inputs level to be on the efficiency frontier (100%) (slack values). Thus, the DEA model identifies the underperforming units and the most feasible path to move to efficiency frontier. The DEA model identifies the peer units that are closely related to these units and calculates the value of the slack variables required to achieve the same efficiency level as their peers.

Citation

Malhotra, R. and Malhotra, D.K. (2018), "An Empirical Analysis of the Performance of Residential Real Estate Investment Funds", Applications of Management Science (Applications of Management Science, Vol. 19), Emerald Publishing Limited, Leeds, pp. 21-35. https://doi.org/10.1108/S0276-897620180000019002