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Selectivity, Timing and the Performance of Listed Property Trusts: Implications for Investment Strategies

Author/s: Vincent Peng

Date Published: 1/01/2004

Published in: Volume 10 - 2004 Issue 2 (pages 235 - 255)

Abstract

This study evaluates the performance of Australian Listed Property Trusts (LPTs) in the context of selectivity and timing over June 1998 to May 2003, and provides significant practical implications for investment strategies for LPT managers. The importance of benchmark indices and model specifications to performance evaluation is tested and highlighted in this paper. After specifying the appropriate model, the author has defined and constructed the appropriate benchmark indices for evaluating the performance of Australian LPTs. The study results provide evidence of superior strategic skills of Australian LPT managers over the study period based on study results. This paper further illustrates the importance of longer-term market forecasts, especially in the circumstance where a lengthy time is required to apply timing skills. It suggests that managers who are superior in longer-term macro forecasts will have the edge to outperform the market portfolio and competitors, providing significant implications for investment decision-making. Finally, this paper demonstrates the importance of including the ‘risk’ factor in performance measurement and provides significant implications for market practitioners on how to avoid over/under-estimation of the true performance of a LPT.

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