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The Beta Anomaly in the REIT Market

Author

Listed:
  • Jianfu Shen

    (The Hong Kong Polytechnic University)

  • Eddie C.M. Hui

    (The Hong Kong Polytechnic University)

  • Kwokyuen Fan

    (The Hong Kong Polytechnic University)

Abstract

This research examined whether the beta anomaly exists in the REIT market. By analysing a low-minus-high beta strategy and a betting-against-beta strategy in the REIT market, we find that high-beta REITs earn significantly lower risk-adjusted returns than low-beta REITs. This beta anomaly is only significant in the New REIT Era after 1993. The negative relationship between beta and REIT stock return does not disappear after taking into account some firm characteristics, suggesting that the beta anomaly in the REIT market is not driven by beta’s correlation with profitability, asset growth, lottery-like return or the skewness of stock returns. We find that institutional investors, whose portfolios increasingly contain a significant proportion of REITs, prefer the high-beta REITs. The exposure of institutional investors to high-beta REITs could explain the beta anomaly in the REIT market.

Suggested Citation

  • Jianfu Shen & Eddie C.M. Hui & Kwokyuen Fan, 2021. "The Beta Anomaly in the REIT Market," The Journal of Real Estate Finance and Economics, Springer, vol. 63(3), pages 414-436, October.
    • Handle: RePEc:kap:jrefec:v:63:y:2021:i:3:d:10.1007_s11146-020-09784-3
    DOI: 10.1007/s11146-020-09784-3
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    Cited by:

    1. Bilgehan Tekin, 2021. "The Factors Affecting the Market Value/Book Value and Profitability of REITs in Turkey," International Real Estate Review, Global Social Science Institute, vol. 24(3), pages 469-499.
    2. Wendi Zhang & Bin Li & Alan Wee-Chung Liew & Eduardo Roca & Tarlok Singh, 2023. "Predicting the returns of the US real estate investment trust market: evidence from the group method of data handling neural network," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-33, December.
    3. Jianfu Shen & Kwong Wing Chau, 2022. "The Effect of Access to the Public Debt Market on Corporate Financing Decisions: The Case of REITs," Sustainability, MDPI, vol. 14(13), pages 1-19, June.
    4. Daoju Peng & Jianfu Shen & Simon Yu Kit Fung & Eddie C. M. Hui & Kwokyuen Fan, 2024. "The Valuation Effect and Consequences of Clawback Adoption in Real Estate Investment Trusts," The Journal of Real Estate Finance and Economics, Springer, vol. 68(2), pages 274-317, February.
    5. Gregg Fisher & Eva Steiner & Sheridan Titman & Ashvin Viswanathan, 2022. "Location density, systematic risk, and cap rates: Evidence from REITs," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(2), pages 366-400, June.
    6. Geoffrey M. Ngene & Catherine Anitha Manohar & Ivan F. Julio, 2020. "Overreaction in the REITs Market: New Evidence from Quantile Autoregression Approach," JRFM, MDPI, vol. 13(11), pages 1-28, November.

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