REITs exhibit a strong and prevalent momentum effect that is not captured by
conventional factor models. This REIT momentum anomaly hampers proper judgments
about the performance of actively managed REIT portfolios. In contrast, a REIT
momentum factor adds incremental explanatory power to performance attribution
models for REIT portfolios. Using this factor, this study finds that REIT
momentum explains a great deal of the abnormal returns that actively managed
REIT mutual funds earn in aggregate. Accounting for exposure to REIT momentum
also materially influences cross-sectional comparisons of the performances of
REIT mutual funds. This study has important implications for performance
evaluation, alpha–beta separation, and manager selection and
compensation.