An Anatomy of the Interrelationship between Equity and Mortgage REITs

International Real Estate Review, 2017, vol. 20, issue 3, 287-324

Posted: 26 Mar 2018

See all articles by J. Andrew Hansz

J. Andrew Hansz

E.V. Williams Center for Real Estate

Wikrom Prombutr

California State University, Long Beach

Ying Zhang

Fairfield University

Tingyu Zhou

Florida State University

Date Written: 2017

Abstract

We investigate the long- and short-term interrelationships between equity and mortgage real estate investment trusts (REITs) by focusing on decomposed income and appreciation components. We find that the previously documented long-term cointegration relation between equity and mortgage REIT prices stems exclusively from their income components and subsequently, the appreciation components contribute nothing to such a long-term relationship. We also find that the previously documented short-term causal relation between equity and mortgage REIT returns is due to the causality that runs from the appreciation returns of equity REITs to those of mortgage REITs while their income returns do not lead to causality. Lastly, we show that the income returns of both equity and mortgage REITs are influenced by the same equity market factor while their appreciation returns are responsive to different macroeconomic factors, which explain the heterogeneous performance between them.

Suggested Citation

Hansz, J. Andrew and Prombutr, Wikrom and Zhang, Ying and Zhou, Tingyu, An Anatomy of the Interrelationship between Equity and Mortgage REITs (2017). International Real Estate Review, 2017, vol. 20, issue 3, 287-324, Available at SSRN: https://ssrn.com/abstract=3149001

J. Andrew Hansz

E.V. Williams Center for Real Estate ( email )

Norfolk, VA 23529-0222
United States
7576833505 (Phone)

Wikrom Prombutr

California State University, Long Beach ( email )

1250 Bellflower Blvd
Long Beach, CA 90064
United States

Ying Zhang (Contact Author)

Fairfield University ( email )

Dolan School of Business
1073 North Benson Road
Fairfield, CT 06824
United States

Tingyu Zhou

Florida State University ( email )

821 Academic Way
Tallahassee, FL 32306
United States

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