The Cross-Section of Expected REIT Returns

University of Texas at Austin Working Paper

37 Pages Posted: 27 May 2003

See all articles by Andy C.W. Chui

Andy C.W. Chui

Hong Kong Polytechnic University

K.C. John Wei

Hong Kong Polytechnic University

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: March 3, 2003

Abstract

In this study, we examine the cross-sectional determinants of expected REIT returns. We examine both the pre- and post-1990 periods, since the structure of the REIT market changed substantially around 1990. The determinants of expected returns differ between the two subperiods. In the pre-1990 subperiod, momentum, size, turnover and analyst coverage predict REIT returns. In the post-1990 period, momentum is the dominant predictor of REIT returns. Given the strength of the momentum effect in the post-1990 period, we examine it in great detail. For the whole period, and the post-1990 period where the momentum profit is strongest, our evidence is generally consistent with the studies on common stocks other than REITs. The only striking exception is that we find that momentum is stronger for the larger REITs rather than for the smaller REITs. In our multiple regressions that include the characteristics as well as interactions between past returns and firm characteristics, the turnover-momentum interaction effect provides the most significant results. More specifically, momentum effects are stronger for more liquid REITs.

Keywords: REITs, Momentum, Expected returns

JEL Classification: G1

Suggested Citation

Chui, Andy Chun Wai and Wei, Kuo-Chiang (John) and Titman, Sheridan, The Cross-Section of Expected REIT Returns (March 3, 2003). University of Texas at Austin Working Paper. Available at SSRN: https://ssrn.com/abstract=402660 or http://dx.doi.org/10.2139/ssrn.402660

Andy Chun Wai Chui

Hong Kong Polytechnic University ( email )

M808, Li Ka Shing Tower
Hung Hom, Kowloon, Kowloon
Hong Kong
(852)2766 7105 (Phone)
(852)2356 9550 (Fax)

Kuo-Chiang (John) Wei

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

Sheridan Titman (Contact Author)

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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