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Performance differences in property‐type diversified versus specialized real estate investment trusts (REITs)

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  • Justin D. Benefield
  • Randy I. Anderson
  • Leonard V. Zumpano

Abstract

Evidence from the corporate finance literature indicates that diversified firms trade at a discount to otherwise comparable specialized firms. However, very little research has addressed whether a similar diversification discount might exist in equity REITs that diversify across property types relative to those specializing in one property type. Using a sample of 75 equity REITs, the existence of a property‐type diversification discount is tested using standard Jensen's Alpha, Treynor Index, and Sharpe Ratio performance ranking methodologies over four commonly employed market proxies. Several variations of these standard tests are also utilized as robustness checks.

Suggested Citation

  • Justin D. Benefield & Randy I. Anderson & Leonard V. Zumpano, 2009. "Performance differences in property‐type diversified versus specialized real estate investment trusts (REITs)," Review of Financial Economics, John Wiley & Sons, vol. 18(2), pages 70-79, April.
    • Handle: RePEc:wly:revfec:v:18:y:2009:i:2:p:70-79
    DOI: 10.1016/j.rfe.2008.04.001
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    References listed on IDEAS

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    Cited by:

    1. Zhilan Feng & Maneechit Pattanapanchai & S. McKay Price & C. F. Sirmans, 2021. "Geographic diversification in real estate investment trusts," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(1), pages 267-286, March.
    2. Elyasiani, Elyas & Movaghari, Hadi, 2022. "Determinants of corporate cash holdings: An application of a robust variable selection technique," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 967-993.
    3. Mariya Letdin & C. Stace Sirmans & G. Stacy Sirmans, 2024. "Spread Too Thin: REIT Asset Dispersion and Divergence of Opinion," The Journal of Real Estate Finance and Economics, Springer, vol. 69(2), pages 201-227, August.
    4. Randy I. Anderson & Hany Guirguis & Joshua A. Harris, 2020. "Cross Border Investing Activity: Return Enhancing or Return Destroying?," Journal of Real Estate Portfolio Management, Taylor & Francis Journals, vol. 26(2), pages 170-185, December.
    5. Calvin W.H. Cheong & Ling-Foon Chan, 2024. "Market context matters: the impact of corporate diversification on REIT performance in Malaysia and Singapore," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 42(3), pages 269-291, March.
    6. Mariya Letdin & Stace Sirmans & G. Stacy Sirmans, 2022. "Betting Against the Sentiment in REIT NAV Premiums," The Journal of Real Estate Finance and Economics, Springer, vol. 64(4), pages 590-614, May.
    7. Abbas Valadkhani & Amir Moradi-Motlagh & Barry O’Mahony, 2025. "An empirical analysis of downside risk and inefficiency in U.S. real estate funds," Empirical Economics, Springer, vol. 69(4), pages 1995-2025, October.

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