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The Information Content of the 1999 Announcement of Funds from Operations (FFO) Changes for Real Estate Investment Trusts

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Author Info
Eric J. Higgins () (Associate Professor of Finance, Kansas State University, Manhattan, Kansas 66506)
Richard L. Ott () (Associate Professor of Accounting, Kansas State University, Manhattan, Kansas 66506)
Robert A. Van Ness () (Associate Professor of Finance, University of Mississippi, University, Mississippi 38677)
Abstract

This study examines the market response to the 1999 announcement of a change in accounting for Funds from Operations (FFO) for Real Estate Investment Trusts (REITs). This change provides an increase in transparency in the accounting statements of REITs regarding the calculation of FFO. An analysis of this announcement finds that shareholder wealth increases but the significance of that increase is questionable. Additionally, an analysis of the adverse selection component of the bid-ask spread finds weak evidence to support the conjecture that the amount of information asymmetry in REIT prices declines after the announcement of the FFO accounting change.

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File URL: http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol28n03/02.241_256.pdf
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Publisher Info
Article provided by American Real Estate Society in its journal journal of Real Estate Research.

Volume (Year): 28 (2006)
Issue (Month): 3 ()
Pages: 241-256
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:jre:issued:v:28:n:3:2006:p:241-256

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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/

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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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L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

References listed on IDEAS
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  1. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February. [Downloadable!] (restricted)
  2. Natalya Delcoure & Ross Dickens, 2004. "REIT and REOC Systematic Risk Sensitivity," Journal of Real Estate Research, American Real Estate Society, vol. 26(3), pages 237-254. [Downloadable!]
  3. Copeland, Thomas E & Galai, Dan, 1983. " Information Effects on the Bid-Ask Spread," Journal of Finance, American Finance Association, vol. 38(5), pages 1457-69, December. [Downloadable!] (restricted)
  4. Allen, Marcus T & Madura, Jeff & Springer, Thomas M, 2000. "REIT Characteristics and the Sensitivity of REIT Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 21(2), pages 141-52, September. [Downloadable!] (restricted)
  5. Huang, Roger D & Stoll, Hans R, 1997. "The Components of the Bid-Ask Spread: A General Approach," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 10(4), pages 995-1034.
  6. George, Thomas J & Kaul, Gautam & Nimalendran, M, 1991. "Estimation of the Bid-Ask Spread and Its Components: A New Approach," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 4(4), pages 623-56. [Downloadable!] (restricted)
  7. Kaplan, Robert S & Roll, Richard, 1972. "Investor Evaluation of Accounting Information: Some Empirical Evidence," Journal of Business, University of Chicago Press, vol. 45(2), pages 225-57, April. [Downloadable!] (restricted)
  8. Lin, Ji-Chai & Sanger, Gary C & Booth, G Geoffrey, 1995. "Trade Size and Components of the Bid-Ask Spread," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 8(4), pages 1153-83. [Downloadable!] (restricted)
  9. Neal, Robert & Wheatley, Simon M., 1998. "Do Measures of Investor Sentiment Predict Returns?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(04), pages 523-547, December. [Downloadable!]
  10. Stoll, Hans R, 1989. " Inferring the Components of the Bid-Ask Spread: Theory and Empirical Tests," Journal of Finance, American Finance Association, vol. 44(1), pages 115-34, March. [Downloadable!] (restricted)
  11. Bessembinder, Hendrik, 2003. "Issues in assessing trade execution costs," Journal of Financial Markets, Elsevier, vol. 6(3), pages 233-257, May. [Downloadable!] (restricted)
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