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REIT Risk Premium Sensitivity and Interest Rates

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  • Swanson, Zane
  • Theis, John
  • Casey, K Michael

Abstract

This analysis investigates several aspects of the relationship between daily REIT stock risk premiums and various interest rates. Consistent with prior research, the general findings indicate that interest rates do impact REIT returns. This study specifically finds that stock returns are more sensitive to maturity rate spread between short- and long-term treasuries than the credit rate spread between commercial bonds and treasuries. In addition, the analyses document a structural model shift during the nineties that has made REITs more sensitive to credit risk. In additional to change in investor clientele, an analysis of declining REIT credit-worthiness points to a root cause for this shift. Copyright 2002 by Kluwer Academic Publishers

Suggested Citation

  • Swanson, Zane & Theis, John & Casey, K Michael, 2002. "REIT Risk Premium Sensitivity and Interest Rates," The Journal of Real Estate Finance and Economics, Springer, vol. 24(3), pages 319-330, May.
    • Handle: RePEc:kap:jrefec:v:24:y:2002:i:3:p:319-30
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