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Reits’ Price Reaction to Unexpected FFO Announcements

Author

Listed:
  • Frank Gyamfi-Yeboah

    ()

  • Alan Ziobrowski

    ()

  • Lisa Lambert

    ()

Abstract

This study examines the reaction of REIT prices to unexpected FFO announcements. Using both the traditionally constrained models and an unconstrained model, we find that the market reacts significantly when REITs announce unexpected FFO with a stronger response for positive than negative surprises. Also, we find that FFO explains significantly more variance in abnormal returns than net income supporting our conjecture that FFO, being more accurately reflective of cash flow, provides more useful information to investors than traditional GAAP measures. Our results are robust to different specifications. The results also suggest that the traditional approaches have been misspecified. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Frank Gyamfi-Yeboah & Alan Ziobrowski & Lisa Lambert, 2012. "Reits’ Price Reaction to Unexpected FFO Announcements," The Journal of Real Estate Finance and Economics, Springer, vol. 45(3), pages 622-644, October.
  • Handle: RePEc:kap:jrefec:v:45:y:2012:i:3:p:622-644
    DOI: 10.1007/s11146-010-9291-y
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    References listed on IDEAS

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