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The Time-Varying Nature of the Link between REIT, Real Estate and Financial Asset Returns

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  • Jim Clayton
  • Greg MacKinnon

Abstract

Executive Summary. This study examines the sensitivity of equity real estate investment trust (REIT) returns to returns on other asset classes, including real estate, using an estimation method that explicitly allows for variation over time in the sensitivities. The results show that the relationship between REIT returns and returns to bonds, small cap stocks, large cap stocks and unsecuritized real estate has changed over time. During the 1990s, REITs began to exhibit a direct link to real estate returns, indicating that REITs do provide portfolios with some exposure to the real estate asset class. The strength of this link, however, is cyclical in nature. The sensitivity of REIT returns to large cap stocks has declined through time. REIT returns exhibit a sensitivity to small cap returns that has a strong cyclical component, with the two becoming more closely linked in REIT market downturns.

Suggested Citation

  • Jim Clayton & Greg MacKinnon, 2001. "The Time-Varying Nature of the Link between REIT, Real Estate and Financial Asset Returns," Journal of Real Estate Portfolio Management, Taylor & Francis Journals, vol. 7(1), pages 43-54, January.
    • Handle: RePEc:taf:repmxx:v:7:y:2001:i:1:p:43-54
    DOI: 10.1080/10835547.2001.12089632
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    Citations

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    Cited by:

    1. Emily Zietz & Stacy Sirmans & Swint Friday, 2003. "The Environment and Performance of Real Estate Investment Trusts," Journal of Real Estate Portfolio Management, Taylor & Francis Journals, vol. 9(2), pages 127-165, January.
    2. Christian Focke, 2006. "The Development of German Open-Ended Real Estate Funds," Journal of Real Estate Literature, Taylor & Francis Journals, vol. 14(1), pages 39-56, January.
    3. Coën, Alain & Guardiola, Philippe, 2025. "Leverage risk and REIT returns," Finance Research Letters, Elsevier, vol. 78(C).
    4. Ming-Chu Chiang & Tien Foo Sing & Long Wang, 2020. "Interactions Between Housing Market and Stock Market in the United States: A Markov Switching Approach," Journal of Real Estate Research, Taylor & Francis Journals, vol. 42(4), pages 552-571, October.
    5. Masud Alam, 2024. "Volatility in U.S. Housing Sector and the REIT Equity Return," The Journal of Real Estate Finance and Economics, Springer, vol. 69(3), pages 505-544, October.
    6. Metin Ilbasmıs & Marc Gronwald & Yuan Zhao, 2025. "The impact of dividend payout policies on real estate market diversification," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 1049-1073, April.

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