The Predictability of Equity REIT Returns

Posted: 29 Oct 1998

See all articles by Edward Nelling

Edward Nelling

Drexel University - Department of Finance

Joseph Gyourko

University of Pennsylvania - Real Estate Department; National Bureau of Economic Research (NBER)

Abstract

This study examines the predictability of monthly returns on equity real estate investment trusts (EREITs) over the period 1975?95 and compares it with that for small- and mid-cap firms. Using the time series approach of Jegadeesh (1990), evidence is found that monthly EREIT returns are predictable based on past performance. However, the predictability is not substantial enough to cover typical transactions costs, so that there is no evidence of unexploited arbitrage opportunities.

The magnitude of EREIT predictability also is examined over different time periods, with the greatest amount found in the most recent data since 1992, which marks the emergence of the new wave of EREITs. Finally, persistence in individual REIT return performance is examined using a nonparametric technique. Limited evidence of persistence in performance is found, with retail-oriented REITs tending to exhibit the most persistence.

JEL Classification: L85

Suggested Citation

Nelling, Edward F. and Gyourko, Joseph E., The Predictability of Equity REIT Returns. Available at SSRN: https://ssrn.com/abstract=137628

Edward F. Nelling (Contact Author)

Drexel University - Department of Finance ( email )

LeBow College of Business
Philadelphia, PA 19104
United States
215.895.2117 (Phone)
215.895.2955 (Fax)

Joseph E. Gyourko

University of Pennsylvania - Real Estate Department ( email )

Philadelphia, PA 19104-6330
United States
215-898-3003 (Phone)
215-573-2220 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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