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Dividend Policy and the Volatility of Real Estate Investment Trusts: Has Support for the Equity Duration Hypothesis Disappeared?

Author

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  • Craig Haberstumpf
  • Anita Pennathur

Abstract

We investigate the Equity Duration Hypothesis (EDH) utilizing dividend yield as a proxy for Equity Duration (ED) in the context of real estate investment trusts (REITs). Consistent with prior research, we find abundant evidence supporting the expectations of the EDH, i.e., that dividend yield has a negative correlation with volatility. However, we also find overwhelming contradictory and ambiguous evidence indicating that a previously strong negative relationship has disappeared, and a strengthening positive one has emerged. Although we found payers to be consistently less volatile than the very small number of nonpayers, the relationship between volatility and dividend yield appears unstable across time periods and within portfolios sorted on size, style, and other factors. Our results varied based on the measurement of dividend yield, with a more restrictive measure containing only regular quarterly dividends delivering results more supportive of the EDH than those of more inclusive measures.

Suggested Citation

  • Craig Haberstumpf & Anita Pennathur, 2025. "Dividend Policy and the Volatility of Real Estate Investment Trusts: Has Support for the Equity Duration Hypothesis Disappeared?," ERES eres2025_188, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2025_188
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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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