Serial persistence in individual real estate returns in the UK

Persistence of property returns is a topic of perennial interest to fund managers as it suggests that choosing those properties that will perform well in the future is as simple as looking at those that performed well in the past. Consequently, much effort has been expended to determine if such a rule exists in the real estate market. This paper extends earlier studies in US, Australian, and UK markets in two ways. First, this study applies the same methodology originally used in Young and Graff (1996) making the results directly comparable with those in the US and Australian property markets. Second, this study uses a much longer and larger database covering all commercial property data available from the Investment Property Databank (IPD), for the years 1981 to 2002 for as many as 216,758 individual property returns. While the performance results of this study mimic the US and Australian results of greater persistence in the extreme first and fourth quartiles, they also evidence persistence in the moderate second and third quartiles, a notable departure from previous studies. Likewise patterns across property type, location, time, and holding period are remarkably similar leading to the conjecture that behaviors in the practice of commercial real estate investment management are themselves deeply rooted and persistent and perhaps influenced for good or ill by agency effects

The transition of the Polish real estate market within a Central and Eastern European context

The real estate market in Poland is a relatively immature market, but one that has been experiencing substantial transformation. The development of the market has been encouraged by a number of factors, including changes arising as a result of new legislation and the migration of capital between capital markets. The progress of the real estate sector towards a western style competitive market has taken place within the gradual transformation of the Polish economy into a free market economy. As investment grade property is in relatively short supply in Poland, investors consider opportunities within the wider CEE block. An analysis of the risk-return characteristics of the three largest CEE real estate markets namely, Poland, Hungary and Czech Republic, shows that the returns in these markets have been negatively correlated with the UK. As these economies and markets evolve, and being part of the wider EU trading block, their economic performance will slowly converge and become more synchronized with their western counterparts. However, the catch-up of the CEE markets to western European performance cycles will be protracted and consequently there are likely to be significant ongoing portfolio risk reduction opportunities

Timing and the holding periods of institutional real estate

The literature on investors’ holding periods for equities and bonds suggest that high transaction costs are associated with longer holding periods. Return volatility, by contrast, is associated with short-term trading and hence shorter holding periods. High transaction costs and the perceived illiquidity of the real estate market leads to an expectation of longer holding periods. Further, work on depreciation and obsolescence might suggest that there is an optimal holding period. However, there is little empirical work in the area. In this paper, data from the Investment Property Databank are used to investigate sales rate and holding period for UK institutional real estate between 1981 and 1994. Sales rates are investigated using the Cox proportional hazards framework. The results show longer holding periods than those claimed by investors. There are marked differences by type of property and sales rates vary over time. Contemporaneous returns are positively associated with an increase in the rate of sale. The results shed light on investor behaviour.

The effects of information presentation on real estate market perceptions

The study seeks to identify systematic differences in perception of the real estate market caused by the frames through which people obtain market information. We operationalise the frames through manipulation of data presentation in a commercial real estate market report, selectively controlling time scale, proportionality distortion and negative value presentation. Our findings suggest that such differences are real and their effects should be taken into account in the design and interpretation of market reports.

The influence of a decision support tool on real estate valuations

An appraisal task involves the rendering of market value, an unobservable and hypothetical construct. Direct feedback against this objective is typically not possible, so alternative feedback such as confirmation of previous appraised values may be employed. This may alter the appraiser’s perception of the valuation objective leading to divergence from the appraisal normative model. The real estate literature suggests appraisers have been susceptible to the influence of previous appraised values, often resulting in biased valuations. This research focuses on the efficacy of a decision support tool in eliminating or subduing this bias in the appraisal process.

The blended approach to real estate allocations: performance implications of combining an exposure to German Spezialfonds with Global Listed Real Estate Securities

This paper seeks to increase the understanding of the performance implications for investors who choose to combine an unlisted real estate portfolio (in this case German Spezialfonds) with a (global) listed real estate element. We call this a “blended” approach to real estate allocations. For the avoidance of doubt, in this paper we are dealing purely with real estate equity (listed and unlisted) allocations, and do not incorporate real estate debt (listed or unlisted) or direct property into the process. A previous paper (Moss and Farrelly 2014) showed the benefits of the blended approach as it applied to UK Defined Contribution Pension Schemes. The catalyst for this paper has been the recent attention focused on German pension fund allocations, which have a relatively low (real estate) equity content, and a high bond content. We have used the MSCI Spezialfonds Index as a proxy for domestic German institutional real estate allocations, and the EPRA Global Developed Index as a proxy for a global listed real estate allocation. We also examine whether a rules based trading strategy, in this case Trend Following, can improve the risk adjusted returns above those of a simple buy and hold strategy for our sample period 2004-2015. Our findings are that by blending a 30% global listed portfolio with a 70% allocation (as opposed to a typical 100% weighting) to Spezialfonds, the real estate allocation returns increase from 2.88% p.a. to 5.42% pa. Volatility increases, but only to 6.53%., but there is a noticeable impact on maximum drawdown which increases to 19.4%. By using a Trend Following strategy raw returns are improved from 2.88% to 6.94% p.a. , The Sharpe Ratio increases from 1.05 to 1.49 and the Maximum Drawdown ratio is now only 1.83% compared to 19.4% using a buy and hold strategy . Finally, adding this (9%) real estate allocation to a mixed asset portfolio allocation typical for German pension funds there is an improvement in both the raw return (from 7.66% to 8.28%) and the Sharpe Ratio (from 0.91 to 0.98).

The effect of thermal conductivity of RIM moulds in kinetics cure

Reaction Injection Moulding (RIM) is a moulding technology used for the production of large size and complex plastic parts. The RIM process is characterized essentially by the injection of a highly reactive chemical system (usually polyurethane) and fast cure, in a mould properly closed and thermally controlled. Several studies show that rapid manufacturing moulds obtained in epoxy resins for Thermoplastic Injection Moulding (TIM) affect the moulding process and the final properties of parts. The cycle time and mechanical properties of final parts are reduced, due to a low thermal conductivity of epoxy materials. In contrast, the low conductivity of materials usually applied for the rapid manufacturing of RIM moulds, increase the mechanical properties of final injected parts and reduce the cycle time. This study shows the effect of the rapid manufacturing moulds material during the RIM process. Several materials have been tested for rapid manufacturing of RIM moulds and the analysis of both, temperature profile of moulded parts during injection and the cure data experimentally obtained in a mixing and reaction cell, allow to determine and model the real effect of the mould material on the RIM process.

The PML for rough surface scattering

In this paper we investigate the use of the perfectly matched layer (PML) to truncate a time harmonic rough surface scattering problem in the direction away from the scatterer. We prove existence and uniqueness of the solution of the truncated problem as well as an error estimate depending on the thickness and composition of the layer. This global error estimate predicts a linear rate of convergence (under some conditions on the relative size of the real and imaginary parts of the PML function) rather than the usual exponential rate. We then consider scattering by a half-space and show that the solution of the PML truncated problem converges globally at most quadratically (up to logarithmic factors), providing support for our general theory. However we also prove exponential convergence on compact subsets. We continue by proposing an iterative correction method for the PML truncated problem and, using our estimate for the PML approximation, prove convergence of this method. Finally we provide some numerical results in 2D.(C) 2008 IMACS. Published by Elsevier B.V. All rights reserved.

A fast radiative transfer model for the assimilation of water vapor radiances from the Kalpana very high resolution radiometer

A fast radiative transfer model (RTM) to compute emitted infrared radiances for a very high resolution radiometer (VHRR), onboard the operational Indian geostationary satellite Kalpana has been developed and verified. This work is a step towards the assimilation of Kalpana water vapor (WV) radiances into numerical weather prediction models. The fast RTM uses a regression‐based approach to parameterize channel‐specific convolved level to space transmittances. A comparison between the fast RTM and the line‐by‐line RTM demonstrated that the fast RTM can simulate line‐by‐line radiances for the Kalpana WV channel to an accuracy better than the instrument noise, while offering more rapid radiance calculations. A comparison of clear sky radiances of the Kalpana WV channel with the ECMWF model first guess radiances is also presented, aiming to demonstrate the fast RTM performance with the real observations. In order to assimilate the radiances from Kalpana, a simple scheme for bias correction has been suggested.

Biodegradation of the herbicide mecoprop-p with soil depth and its relationship with class III tfdA genes

Mecoprop-p [(R)-2-(4-chloro-2-methylphenoxy) propanoic acid) is widely used in agriculture and poses an environmental concern because of its susceptibility to leach from soil to water. We investigated the effect of soil depth on mecoprop-p biodegradation and its relationship with the number and diversity of tfdA related genes, which are the most widely known genes involved in degradation of the phenoxyalkanoic acid group of herbicides by bacteria. Mecoprop-p half-life (DT50) was approximately 12 days in soil sampled from <30 cm depth, and increased progressively with soil depth, reaching over 84 days at 70–80 cm. In sub-soil there was a lag period of between 23 and 34 days prior to a phase of rapid degradation. No lag phase occurred in top-soil samples prior to the onset of degradation. The maximum degradation rate was the same in top-soil and sub-soil samples. Although diverse tfdAα and tfdA genes were present prior to mecoprop-p degradation, real time PCR revealed that degradation was associated with proliferation of tfdA genes. The number of tfdA genes and the most probable number of mecoprop-p degrading organisms in soil prior to mecoprop-p addition were below the limit of quantification and detection respectively. Melting curves from the real time PCR analysis showed that prior to mecoprop-p degradation both class I and class III tfdA genes were present in top- and sub-soil samples. However at all soil depths only tfdA class III genes proliferated during degradation. Denaturing gradient gel electrophoresis confirmed that class III tfdA genes were associated with mecoprop-p degradation. Degradation was not associated with the induction of novel tfdA genes in top- or sub-soil samples, and there were no apparent differences in tfdA gene diversity with soil depth prior to or following degradation.

A decade of decentralisation? Assessing the role of the government offices for the English regions

The Government Offices for the English regions were established in 1994 to coordinate the regional activities of three central government departments. A decade on, regional government in England is greatly expanded, and two other institutions of regional governance, the Regional Development Agencies and the Regional Assemblies, have also been created. In 2002 the Labour government proposed that this 'triad' of regional governance should be further reformed and strengthened, in some places being brought to democratic account. In this paper, we argue that academic research on the English regions has generally focused on the Regional Development Agencies and to a lesser extent the Regional Assemblies, to the exclusion of the Government Offices. This focus has led some to overstate the extent to which regional government represents the real decentralisation of power. Focusing on the role of the Government Offices, we argue that central government retains a great deal of power over the 'triad' institutions, which in their current form may be unable to challenge the structure of power in the English state.

How well does the ECMWF Ensemble Prediction System predict blocking?

Forecasting atmospheric blocking is one of the main problems facing medium-range weather forecasters in the extratropics. The European Centre for Medium-Range Weather Forecasts (ECMWF) Ensemble Prediction System (EPS) provides an excellent basis for medium-range forecasting as it provides a number of different possible realizations of the meteorological future. This ensemble of forecasts attempts to account for uncertainties in both the initial conditions and the model formulation. Since 18 July 2000, routine output from the EPS has included the field of potential temperature on the potential vorticity (PV) D 2 PV units (PVU) surface, the dynamical tropopause. This has enabled the objective identification of blocking using an index based on the reversal of the meridional potential-temperature gradient. A year of EPS probability forecasts of Euro-Atlantic and Pacific blocking have been produced and are assessed in this paper, concentrating on the Euro-Atlantic sector. Standard verification techniques such as Brier scores, Relative Operating Characteristic (ROC) curves and reliability diagrams are used. It is shown that Euro-Atlantic sector-blocking forecasts are skilful relative to climatology out to 10 days, and are more skilful than the deterministic control forecast at all lead times. The EPS is also more skilful than a probabilistic version of this deterministic forecast, though the difference is smaller. In addition, it is shown that the onset of a sector-blocking episode is less well predicted than its decay. As the lead time increases, the probability forecasts tend towards a model climatology with slightly less blocking than is seen in the real atmosphere. This small under-forecasting bias in the blocking forecasts is possibly related to a westerly bias in the ECMWF model. Copyright © 2003 Royal Meteorological Society

Recent trends in sea level pressure in the Indian Ocean region

During the second half of the twentieth century the Indian Ocean exhibited a rapid rise in sea surface temperatures (SST). It has been argued - largely on the basis of experiments with atmospheric GCMs - that this rapid warming was an important cause of remote changes in climate, in particular an increasing trend in the North Atlantic Oscillation Index and decreases in African rainfall. Here however we present evidence that the Indian Ocean warming was associated with local increases in sea level pressure (SLP). These increases are inconsistent with results from experiments in which an atmospheric GCM is forced by historical SST, which show robust decreases in SLP. The clear discrepancy between the observed and simulated trends in SLP suggests that the response of some atmospheric GCMs to the Indian Ocean warming may not provide a reliable guide to the behaviour of the real world.

The potential to narrow uncertainty in projections of regional precipitation change

We separate and quantify the sources of uncertainty in projections of regional (*2,500 km) precipitation changes for the twenty-first century using the CMIP3 multi-model ensemble, allowing a direct comparison with a similar analysis for regional temperature changes. For decadal means of seasonal mean precipitation, internal variability is the dominant uncertainty for predictions of the first decade everywhere, and for many regions until the third decade ahead. Model uncertainty is generally the dominant source of uncertainty for longer lead times. Scenario uncertainty is found to be small or negligible for all regions and lead times, apart from close to the poles at the end of the century. For the global mean, model uncertainty dominates at all lead times. The signal-to-noise ratio (S/N) of the precipitation projections is highest at the poles but less than 1 almost everywhere else, and is far lower than for temperature projections. In particular, the tropics have the highest S/N for temperature, but the lowest for precipitation. We also estimate a ‘potential S/N’ by assuming that model uncertainty could be reduced to zero, and show that, for regional precipitation, the gains in S/N are fairly modest, especially for predictions of the next few decades. This finding suggests that adaptation decisions will need to be made in the context of high uncertainty concerning regional changes in precipitation. The potential to narrow uncertainty in regional temperature projections is far greater. These conclusions on S/N are for the current generation of models; the real signal may be larger or smaller than the CMIP3 multi-model mean. Also note that the S/N for extreme precipitation, which is more relevant for many climate impacts, may be larger than for the seasonal mean precipitation considered here.

Factors influencing anthropogenic carbon dioxide uptake in the North Atlantic in models of the ocean carbon cycle

The uptake and storage of anthropogenic carbon in the North Atlantic is investigated using different configurations of ocean general circulation/carbon cycle models. We investigate how different representations of the ocean physics in the models, which represent the range of models currently in use, affect the evolution of CO2 uptake in the North Atlantic. The buffer effect of the ocean carbon system would be expected to reduce ocean CO2 uptake as the ocean absorbs increasing amounts of CO2. We find that the strength of the buffer effect is very dependent on the model ocean state, as it affects both the magnitude and timing of the changes in uptake. The timescale over which uptake of CO2 in the North Atlantic drops to below preindustrial levels is particularly sensitive to the ocean state which sets the degree of buffering; it is less sensitive to the choice of atmospheric CO2 forcing scenario. Neglecting physical climate change effects, North Atlantic CO2 uptake drops below preindustrial levels between 50 and 300 years after stabilisation of atmospheric CO2 in different model configurations. Storage of anthropogenic carbon in the North Atlantic varies much less among the different model configurations, as differences in ocean transport of dissolved inorganic carbon and uptake of CO2 compensate each other. This supports the idea that measured inventories of anthropogenic carbon in the real ocean cannot be used to constrain the surface uptake. Including physical climate change effects reduces anthropogenic CO2 uptake and storage in the North Atlantic further, due to the combined effects of surface warming, increased freshwater input, and a slowdown of the meridional overturning circulation. The timescale over which North Atlantic CO2 uptake drops to below preindustrial levels is reduced by about one-third, leading to an estimate of this timescale for the real world of about 50 years after the stabilisation of atmospheric CO2. In the climate change experiment, a shallowing of the mixed layer depths in the North Atlantic results in a significant reduction in primary production, reducing the potential role for biology in drawing down anthropogenic CO2.