Valuation practice of German open-ended real estate funds
||Valuation practice of German open-ended real estate funds
||Book of Abstracts: 15th Annual European Real Estate Society Conference in Kraków, Poland
||The German valuation system is frequently accused of being not only unique in its institutional setting but also of the degree of smoothness it achieves. Formally adhering to a market value concept, German valuers are perceived to merely deliver on the promises made by fund managers who advertise a “steady growth” and “low volatility” investment alternative. However, empirical evidence is scarce with regard to the scope and degree of return smoothing and other systematic appraisal errors. A thorough investigation of the German valuation practice seems warranted, as it will help to gain better understanding of observed property valuations and its implication for the stability of German open-ended funds. To what extent do valuations understate true return volatility? Do valuations lag prices and do they introduce a systematic bias to reported performance measures? Is the German legal/ regulatory framework to blame for such possible shortcomings or do the problems root in actual valuation practice? These and related questions will be addressed within this project.
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