Predictability in Equilibrium: The Price Dynamics of Real Estate Investment Trusts
Dennis R. Capozza
The Stephen M. Ross School of Business at the University of Michigan
Ryan D. Israelsen
Indiana University - Department of Finance
Real Estate Economics, Vol. 35, No. 4, pp. 541-567, Winter 2007
This research hypothesizes that, in markets where information costs, transaction costs and the economic impact of information can vary widely, we should expect predictability to vary systematically. We test this hypothesis with data on equity real estate investment trusts (REITs) from 1985 to 1992. We document that levels of predictability vary with firm characteristics like leverage, size and focus. Momentum is stronger for larger, more levered REITs. Reversion is faster for focused, levered REITs. The results are consistent with the hypothesis that, in equilibrium, securities, where information is either less costly to acquire or has less impact on fundamental value, should exhibit less predictability.
Number of Pages in PDF File: 27Accepted Paper Series
Date posted: November 18, 2007
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