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The information content of funds from operations and net income in real estate investment trusts

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  • Seok, Sang Ik
  • Cho, Hoon
  • Ryu, Doojin

Abstract

This study compares the information content of funds from operations (FFO) and net income (NI) in the real estate investment trust (REIT) industry. We find that models using FFO explain more of the variance in cumulative abnormal returns around earnings announcement dates than models using NI do. We also find that the information content of FFO differs across REITs of different sizes. FFO does not provide useful information to investors in the case of large REITs. Finally, we show that the gain or loss from sales of property is relevant to valuing large REITs.

Suggested Citation

  • Seok, Sang Ik & Cho, Hoon & Ryu, Doojin, 2020. "The information content of funds from operations and net income in real estate investment trusts," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:ecofin:v:51:y:2020:i:c:s1062940819300907
    DOI: 10.1016/j.najef.2019.101063
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    Cited by:

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    2. Song Joonhyuk & Ryu Doojin, 2021. "Houses as Collateral and Household Debt Deleveraging in Korea," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 15(1), pages 3-27, January.

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    More about this item

    Keywords

    Earnings announcement; Funds from operations; Market reaction; Net income; Real estate investment trust;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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