Do REITs Behave More Like Real Estate Now?

17 Pages Posted: 31 Dec 2007

See all articles by I. Chun Tsai

I. Chun Tsai

Southern Taiwan University of Science and Technology - Department of Finance

Ming-Chi Chen

National Sun Yat-sen University - Department of Finance

Tien Foo Sing

National University of Singapore (NUS) - Department of Real Estate

Date Written: November 2007

Abstract

This paper applies the Time Varying Coefficient (TVC) approach to examine the systematic risks of the National Association of Real Estate Investment Trusts (NAREIT) return index using the Capital Asset Pricing Model (CAPM) framework. We found that the systematic risk of Real Estate Investment Trusts (REITs) is time varying with the REIT-beta declining over time. The declining beta reflects the greater acceptance of REITs as an important asset class in investors' portfolios. Investors would accept a lower risk premium because investors are better able to price the underlying assets the longer REIT assets are securitized. The results support the view that the real estate securities behave more like real estate and less like the general stock market.

Keywords: Real Estate Investment Trusts, NAREIT, Securitized, Systematic Risk, Time Varying Coefficient

Suggested Citation

Tsai, I. Chun and Chen, Ming-Chi and Sing, Tien Foo, Do REITs Behave More Like Real Estate Now? (November 2007). Available at SSRN: https://ssrn.com/abstract=1079590 or http://dx.doi.org/10.2139/ssrn.1079590

I. Chun Tsai

Southern Taiwan University of Science and Technology - Department of Finance ( email )

Nan-Tia St.
Tainan Taiwain 710, Tainan
China

Ming-Chi Chen

National Sun Yat-sen University - Department of Finance ( email )

No.70, Lianhai Rd., Gushan District,
Kaohsiung City
Taiwan

HOME PAGE: http://cm.nsysu.edu.tw/~mcchen/index.html

Tien Foo Sing (Contact Author)

National University of Singapore (NUS) - Department of Real Estate ( email )

15 Kent Ridge Drive
NATIONAL UNIVERSITY OF SINGAPORE (MOCHTAR RIADY BU
Singapore 117566, 119245
Singapore
06565164553 (Phone)

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