Fundamental Drivers of Dependence in REIT Returns

Posted: 24 Aug 2018

See all articles by Jamie Alcock

Jamie Alcock

The University of Sydney Business School; Centre for International Finance and Regulation (CIFR)

Eva Steiner

Penn State Smeal College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: August 14, 2018

Abstract

We analyse the empirical relationships between firm fundamentals and the dependence structure between individual REIT and stock market returns. In contrast to previous studies, we distinguish between the average systematic risk of REITs and their asymmetric risk in the sense of a disproportionate likelihood of joint negative return clusters between REITs and the stock market. We find that REITs with low systematic risk are typically small, with low short-term momentum, low turnover, high growth opportunities and strong long-term momentum. Specifically, we find that leverage has an asymmetric effect on REIT return dependence that outweighs the extent to which it increases the average sensitivity of REIT equity to market fluctuations, explaining the strong negative impact of leverage on firm performance especially during crisis periods that has been documented in recent empirical work.

Keywords: Portfolio Diversification; REITs, Real Estate as an Asset Class

JEL Classification: G11, G12

Suggested Citation

Alcock, Jamie and Steiner, Eva Maria, Fundamental Drivers of Dependence in REIT Returns (August 14, 2018). Journal of Real Estate Finance and Economics, Vol. 57, No. 1, 2018, Available at SSRN: https://ssrn.com/abstract=3231114

Jamie Alcock

The University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Eva Maria Steiner (Contact Author)

Penn State Smeal College of Business ( email )

University Park, PA 16802
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
426
PlumX Metrics