Reits, Growth Options and Beta

Posted: 4 Nov 2017

See all articles by Dogan Tirtiroglu

Dogan Tirtiroglu

Kadir Has University

Thu Ha Nguyen

Monash University - Department of Banking and Finance

Ercan Tirtiroglu

University of Adelaide - Business School

Date Written: November 2, 2017

Abstract

Are REITs income stocks, only? Following Myers (1977) and Bernardo et al. (2007), we examine empirically REITs' unlevered betas, betas of growth options, betas of assets-in-lace and the difference between the latter two in detail for 1983-2012, and also for three sequential, distinct, than those of assets-in-lace, (ii) there are differences in these betas across Equity REITs' sub-debt and are mainly listed on NASDAQ, and (iv) the Global Financial Crisis has influenced considerably the beta estimates across all sub-sectors and REIT types. These findings raise a question mark about the 'income stock, only' description of REITs. Our findings have important implications for the cost of capital of REITs and their capital budgeting practices. We discuss them, when appropriate, with numerical examples.

Keywords: Beta, Growth option; Assets-in-place; REITs, REIT maturity era; Cost of capital

JEL Classification: G10, G11, G12

Suggested Citation

Tirtiroglu, Dogan and Nguyen, Thu Ha and Tirtiroglu, Ercan, Reits, Growth Options and Beta (November 2, 2017). Journal of Real Estate Finance and Economics, Vol. 55, No. 3, 2017, Available at SSRN: https://ssrn.com/abstract=3064224

Dogan Tirtiroglu (Contact Author)

Kadir Has University ( email )

Istanbul
Turkey

Thu Ha Nguyen

Monash University - Department of Banking and Finance

Melbourne
Australia

Ercan Tirtiroglu

University of Adelaide - Business School ( email )

10 Pulteney Street
Adelaide, South Australia 5005
Australia

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