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The Cross Section of Expected REIT Returns


  • Andy C. W. Chui
  • Sheridan Titman
  • K. C. John Wei


In this study, we examine the cross-sectional determinants of expected REIT returns. We examine both the pre- and post-1990 periods, since the structure of the REIT market changed substantially around 1990. The determinants of expected returns differ between the two subperiods. In the pre-1990 subperiod, momentum, size, turnover and analyst coverage predict REIT returns. In the post-1990 period, momentum is the dominant predictor of REIT returns. Given the strength of the momentum effect in the post-1990 period, we examine it in great detail. For the whole period, and for the post-1990 period where the momentum profit is strongest, our evidence is generally consistent with the studies on common stocks other than REITs. The only striking exception is that we find that momentum is stronger for the larger REITs rather than for the smaller REITs. In our multiple regressions that include the characteristics as well as interactions between past returns and firm characteristics, the turnover-momentum interaction effect provides the most significant results. More specifically, momentum effects are stronger for more liquid REITs. Copyright 2003 by the American Real Estate and Urban Economics Association

Suggested Citation

  • Andy C. W. Chui & Sheridan Titman & K. C. John Wei, 2003. "The Cross Section of Expected REIT Returns," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(3), pages 451-479, September.
  • Handle: RePEc:bla:reesec:v:31:y:2003:i:3:p:451-479

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    References listed on IDEAS

    1. Fama, Eugene F., 1976. "Forward rates as predictors of future spot rates," Journal of Financial Economics, Elsevier, vol. 3(4), pages 361-377, October.
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    Cited by:

    1. Jamie Alcock & John Glascock & Eva Steiner, 2013. "Manipulation in U.S. REIT Investment Performance Evaluation: Empirical Evidence," The Journal of Real Estate Finance and Economics, Springer, vol. 47(3), pages 434-465, October.
    2. Thomas C. Chiang & Hooi Hooi Lean & Wing-Keung Wong, 2008. "Do REITs Outperform Stocks and Fixed-Income Assets? New Evidence from Mean-Variance and Stochastic Dominance Approaches," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 1(1), pages 1-40, December.
    3. Cheng Wee Tan & Dogan Tirtiroglu & Ercan Tirtiroglu, 2013. "Reits' Growth Options and Asset Pricing Dynamics across Time," KoƧ University-TUSIAD Economic Research Forum Working Papers 1303, Koc University-TUSIAD Economic Research Forum.
    4. Pierpaolo Pattitoni & Barbara Petracci & Massimo Spisni, 2011. "Fee Structure, Financing, and Investment Decisions: The Case of REITs," Working Paper series 30_11, Rimini Centre for Economic Analysis.
    5. Haiwei Chen & Ansley Chua & Changha Jin, 2013. "Analyst Forecasting Errors in REITs," International Real Estate Review, Asian Real Estate Society, vol. 16(1), pages 48-67.
    6. Emanuela Giacomini & David Ling & Andy Naranjo, 2015. "Leverage and Returns: A Cross-Country Analysis of Public Real Estate Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 51(2), pages 125-159, August.
    7. Paul Goebel & David Harrison & Jeffrey Mercer & Ryan Whitby, 2013. "REIT Momentum and Characteristic-Related REIT Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 47(3), pages 564-581, October.
    8. Crystal Lin & Hamid Rahman & Kenneth Yung, 2009. "Investor Sentiment and REIT Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 39(4), pages 450-471, November.
    9. repec:kap:jrefec:v:55:y:2017:i:3:d:10.1007_s11146-016-9590-z is not listed on IDEAS
    10. repec:kap:jrefec:v:54:y:2017:i:3:d:10.1007_s11146-016-9573-0 is not listed on IDEAS
    11. Erik Devos & Thomas McInish & Michael McKenzie & James Upson, 2014. "Naked Short Selling and the Market Impact of Fails-to-Deliver: Evidence from the Trading of Real Estate Investment Trusts," The Journal of Real Estate Finance and Economics, Springer, vol. 49(4), pages 454-476, November.
    12. Joseph Ooi & Jingliang Wang & James Webb, 2009. "Idiosyncratic Risk and REIT Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 38(4), pages 420-442, May.
    13. Minye Zhang & Yongheng Deng, 2008. "REITs Return Behavior and Legal Infrastructure: The 1993 Revenue Reconciliation Act & Inspirations for China's Emerging REITS Market," Working Paper 8532, USC Lusk Center for Real Estate.
    14. Joseph T.L. Ooi & James R. Webb & Dingding Zhou, 2007. "Extrapolation Theory and the Pricing of REIT Stocks," Journal of Real Estate Research, American Real Estate Society, vol. 29(1), pages 27-56.
    15. Kevin C.H. Chiang & Kirill Kozhevnikov & Ming-Long Lee & Craig H. Wisen, 2006. "REIT Mimicking Portfolio Analysis," International Real Estate Review, Asian Real Estate Society, vol. 9(1), pages 95-111.

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