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Return Properties of Equity REITs, Common Stocks, and Commercial Real Estate: A Comparison

Most previous studies of REIT-securitized real estate examine the performance of REITs versus only common stocks. In addition, previous studies have focused on the mean and standard deviation of returns, while this study also examines skewness, kurtosis, and conducts several tests of normality for the returns. The time series properties of the returns are also examined by calculating the autocorrelation function for each of the series. Finally, this study extends the results of Giliberto concerning the intertemporal relationship between REIT returns and real estate returns by examining a vector autoregressive model in which returns on pairs of assets are modeled as a linear function of lags of their own returns and lags of the returns on the other asset in the pair. Granger causality tests are also performed to determine if an asset's returns Granger cause the returns on the other asset. In the distributional and time series sense, equity REIT returns appear to be much more like those on common stocks and closed-end funds than those on unsecuritized real estate. Intertemporally, REIT returns are much more strongly related to unsecuritized real estate than stocks or closed-end funds. The equity REIT index returns were found to Granger cause unsecuritized real estate returns for most of the real estate indices. Results were somewhat mixed for the individual REITs.

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

Volume (Year): 8 (1993)
Issue (Month): 1 ()
Pages: 87-106

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Handle: RePEc:jre:issued:v:8:n:1:1993:p:87-106
Contact details of provider: 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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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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  1. Ross, Stephen A & Zisler, Randall C, 1991. "Risk and Return in Real Estate," The Journal of Real Estate Finance and Economics, Springer, vol. 4(2), pages 175-90, June.
  2. Fama, Eugene F & French, Kenneth R, 1988. "Permanent and Temporary Components of Stock Prices," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 246-73, April.
  3. S. Michael Giliberto, 1990. "Equity Real Estate Investment Trusts and Real Estate Returns," Journal of Real Estate Research, American Real Estate Society, vol. 5(2), pages 259-264.
  4. 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.
  5. Lee, Charles M C & Shleifer, Andrei & Thaler, Richard H, 1991. " Investor Sentiment and the Closed-End Fund Puzzle," Journal of Finance, American Finance Association, vol. 46(1), pages 75-109, March.
  6. James L. Kuhle, 1987. "Portfolio Diversification and Return Benefits--Common Stock vs. Real Estate Investment Trusts (REITs)," Journal of Real Estate Research, American Real Estate Society, vol. 2(2), pages 1-9.
  7. 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.
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