The Information Content of REIT Credit Rating Actions and Transparency

We examine the short-run and long-run price reaction of equity real estate investment trust (REIT) shares following credit rating actions, testing the transparency of the REIT structure. Generally, the economic effect on the stock price is subdued for both upgrades and downgrades compared to prior literature examining the broader U.S. equity market. An examination of trading volume revealed a significant increase in trading in reaction to downgrade credit rating changes, with a more subdued response to upgrades. The findings support the notion that REITs are more publicly forthcoming about the expectation of positive news in comparison to negative news.

Keywords: REIT, price reaction, credit rating, economic effect, news reaction

Suggested Citation: Suggested Citation

Tidwell, O. Alan and Ziobrowski, Alan J. and Gallimore, Paul and Ro, SeungHan, The Information Content of REIT Credit Rating Actions and Transparency (January 13, 2014). Available at SSRN: https://ssrn.com/abstract=2378426 or http://dx.doi.org/10.2139/ssrn.2378426