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The Historical Performance of Real Estate Investment Trusts

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    Abstract

    This empirical study investigates the performance of Real Estate Investment Trusts (REITs). Although many people have studied REIT performance, their findings on the long-term performance of REITs are generally inconclusive. The objectives of this study are: (1) to evaluate the long-term (1970-1993) performance of REITs; (2) to examine the stability of REIT performance over time; and (3) to investigate the sensitivity of a specific performance measure, the Jensen index, to two general performance benchmarks and two REIT samples. The results indicate that the performance of the REIT portfolios was consistent with the security market line for the 1970-1993 period. However, REIT performance varied over the period. This study also found that the use of the unrepresentative S&P 500 index as a performance benchmark tends to overstate REIT performance. Finally, survivor REITs in general performed better than the overall REIT population.

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    File URL: http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol10n03/v10p235.pdf
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    Bibliographic Info

    Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

    Volume (Year): 10 (1995)
    Issue (Month): 3 ()
    Pages: 235-262

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    Handle: RePEc:jre:issued:v:10:n:3:1995:p:235-262

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    Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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    Web page: http://www.aresnet.org/

    Order Information:
    Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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    Web: http://aux.zicklin.baruch.cuny.edu/jrer/about/get.htm

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    1. Crocker H. Liu & David J. Hartzell & Terry V. Grissom & Wylie Greig, 1990. "The Composition of the Market Portfolio and Real Estate Investment Performance," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(1), pages 49-75.
    2. W. B. Brueggeman & A. H. Chen & T. G. Thihodeau, 1984. "Real Estate Investment Funds: Performance and Portfolio Considerations," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(3), pages 333-354.
    3. K.C. Chan & Patric H. Hendershott & Anthony B. Sanders, 1990. "Risk and Return on Real Estate: Evidence from Equity REITs," NBER Working Papers 3311, National Bureau of Economic Research, Inc.
    4. Paul H. Goebel & Kee S. Kim, 1989. "Performance Evaluation of Finite-Life Real Estate Investment Trusts," Journal of Real Estate Research, American Real Estate Society, vol. 4(2), pages 57-70.
    5. John D. Martin & Douglas O. Cook, 1991. "A Comparison of the Recent Performance of Publicly Traded Real Property Portfolios and Common Stock," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(2), pages 184-212.
    6. K.C. Chen & Daniel D. Tzang, 1988. "Interest-Rate Sensitivity of Real Estate Investment Trusts," Journal of Real Estate Research, American Real Estate Society, vol. 3(3), pages 13-22.
    7. Sheridan Titman & Arthur Warga, 1986. "Risk and the Performance of Real Estate Investment Trusts: A Multiple Index Approach," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 14(3), pages 414-431.
    8. James R. Webb & Willard McIntosh, 1986. "Real Estate Investment Acquisition Rules for REITs: A Survey," Journal of Real Estate Research, American Real Estate Society, vol. 1(1), pages 77-98.
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    Cited by:
    1. Hongyan Du & Yongkai Ma, 2012. "Corporate Real Estate, Capital Structure and Stock Performance: Evidence from China," International Real Estate Review, Asian Real Estate Society, vol. 15(1), pages 107-126.
    2. Peter Oppenheimer & Terry V. Grissom, 1998. "Frequency Space Correlation Between REITs and Capital Market Indices," Journal of Real Estate Research, American Real Estate Society, vol. 16(3), pages 291-310.
    3. Michael J. Seiler & Arjun Chatrath & James R. Webb, 2001. "Real Asset Ownership and the Risk and Return to Stockholders," Journal of Real Estate Research, American Real Estate Society, vol. 22(1/2), pages 199-212.
    4. Armonat, Stefan & Pfnür, Andreas, 2002. "Basel II and the German credit crunch?," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 35585, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    5. William G. Hardin, III & Marvin L. Wolverton, 1999. "Equity REIT Property Acquisitions: Do Apartment REITs Pay a Premium?," Journal of Real Estate Research, American Real Estate Society, vol. 17(1), pages 113-126.
    6. Benjamas Jirasakuldech & Robert Campbell & John Knight, 2006. "Are There Rational Speculative Bubbles in REITs?," The Journal of Real Estate Finance and Economics, Springer, vol. 32(2), pages 105-127, March.
    7. Pim Klamer & Cees Gorter & Peter Nijkamp, 2001. "Retail Investments by Real Estate Investment Trusts," Tinbergen Institute Discussion Papers 01-049/3, Tinbergen Institute.
    8. Pim Klamer & Cees Gorter & Peter Nijkamp, 2001. "Retail Investments by Real Estate Investment Trusts," Tinbergen Institute Discussion Papers 01-049/3, Tinbergen Institute.
    9. Yougou Liang & Michael J. Seiler & Arjun Chatrath, 1998. "Are REIT Returns Hedgeable?," Journal of Real Estate Research, American Real Estate Society, vol. 16(1), pages 87-98.
    10. Ling T. He, 1998. "Cointegration and Price Discovery between Equity and Mortgage REITs," Journal of Real Estate Research, American Real Estate Society, vol. 16(3), pages 327-338.

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