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REIT and REOC Systematic Risk Sensitivity

Author

Listed:
  • Natalya Delcoure

    () (Department of Economics & Finance,Mitchell College of Business, University of South Alabama, Mobile, AL 36688)

  • Ross Dickens

    () (Department of Economics & Finance, Mitchell College of Business, University of South Alabama, Mobile, AL 36688)

Abstract

Real Estate Investment Trusts (REITs) and Real Estate Operating Companies (REOCs) seem to have different systematic risk levels even though both invest almost exclusively in real estate related assets. We find business risk to be negatively related to systematic risk, as measured by beta, for REITs, while REOCs? betas are positively related to agency costs. The two groups? betas also show differing sensitivity to real estate property type and regional location. REITs? systematic risk is also sensitive to financial leverage and financing form.

Suggested Citation

  • 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.
  • Handle: RePEc:jre:issued:v:26:n:3:2004:p:237-254
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    References listed on IDEAS

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    1. Susanne Ethridge Cannon & Stephen C. Vogt, 1995. "REITs and Their Management: An Analysis of Organizational Structure, Performance, and Management Compensation," Journal of Real Estate Research, American Real Estate Society, vol. 10(3), pages 297-318.
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    4. Dirk P.M. De Wit, 1997. "Real Estate Diversification Benefits," Journal of Real Estate Research, American Real Estate Society, vol. 14(2), pages 117-136.
    5. 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 141-152, September.
    6. Redman, Arnold L & Manakyan, Herman, 1995. "A Multivariate Analysis of REIT Performance by Financial and Real Asset Portfolio Characteristics," The Journal of Real Estate Finance and Economics, Springer, vol. 10(2), pages 169-175, March.
    7. K. C. Chan & Patric H. Hendershott & Anthony B. Sanders, 1990. "Risk and Return on Real Estate: Evidence from Equity REITs," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(4), pages 431-452.
    8. Chan, Su Han & Erickson, John & Wang, Ko, 2002. "Real Estate Investment Trusts: Structure: Structure, Performance, and Investment Opportunities," OUP Catalogue, Oxford University Press, number 9780195155341.
    9. Su-Jane Chen & Chengho Hsieh & Timothy W. Vines & Shur-Nuaan Chiou, 1998. "Macroeconomic Variables, Firm-Specific Variables and Returns to REITs," Journal of Real Estate Research, American Real Estate Society, vol. 16(3), pages 269-278.
    10. Vinod Chandrashekaran, 1999. "Time-Series Properties and Diversification Benefits of REIT Returns," Journal of Real Estate Research, American Real Estate Society, vol. 17(1), pages 91-112.
    11. Damodaran, Aswath & John, Kose & Liu, Crocker H., 1997. "The determinants of organizational form changes: evidence and implications from real estate," Journal of Financial Economics, Elsevier, vol. 45(2), pages 169-192, August.
    12. Terence Khoo & David Hartzell & Martin Hoesli, 1993. "An Investigation of the Change in Real Estate Investment Trust Betas," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 21(2), pages 107-130.
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    Cited by:

    1. repec:ire:issued:v:21:n:01:2018:p:41-70 is not listed on IDEAS
    2. Olusegun Olaopin Olanrele, 2014. "Reit Performance Analysis: Are other Factor Determinants Constant?," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(4), pages 492-502, April.
    3. Jaakko Niskanen & Heidi Falkenbach, 2011. "Liquidity of European real estate equities: REITs and REOCs," International Journal of Strategic Property Management, Taylor & Francis Journals, vol. 16(2), pages 173-187, May.
    4. Eric J. Higgins & Richard L. Ott & Robert A. Van Ness, 2006. "The Information Content of the 1999 Announcement of Funds from Operations (FFO) Changes for Real Estate Investment Trusts," Journal of Real Estate Research, American Real Estate Society, vol. 28(3), pages 241-256.
    5. Heidi Falkenbach & Jaakko Niskanen & Sami Kiehelä, 2013. "Development and performance of the public real estate investment sector in Finland," International Journal of Strategic Property Management, Taylor & Francis Journals, vol. 17(3), pages 233-247, September.

    More about this item

    JEL classification:

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

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