Systematic Risk and Diversification in the Equity REIT Market

REAL ESTATE ECONOMICS, Vol.24 No.4, Winter 1996

Posted: 17 Jan 1997

See all articles by Joseph Gyourko

Joseph Gyourko

University of Pennsylvania - Real Estate Department; National Bureau of Economic Research (NBER)

Edward Nelling

Drexel University - Department of Finance

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Abstract

This paper employs stock market-based data to examine the systematic risk and diversification properties of publicly traded equity real estate investment trusts (REITs). A unique data sample is created by combining firm return data with information on their property type holdings and the location of their investments. The systematic risk of equity REITs appears to vary by the type of property in which they invest, with beta being significantly higher for retail-oriented REITs than for REITs owning industrial and warehouse properties. In addition, the stock market data provides no evidence that REIT diversification across property types or broad geographic regions actually results in meaningful diversification as reflected in a standard market-based measure the R2 from a simple market model regression.

JEL Classification: R30

Suggested Citation

Gyourko, Joseph E. and Nelling, Edward F., Systematic Risk and Diversification in the Equity REIT Market. REAL ESTATE ECONOMICS, Vol.24 No.4, Winter 1996, Available at SSRN: https://ssrn.com/abstract=9211

Joseph E. Gyourko (Contact Author)

University of Pennsylvania - Real Estate Department ( email )

Philadelphia, PA 19104-6330
United States
215-898-3003 (Phone)
215-573-2220 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Edward F. Nelling

Drexel University - Department of Finance ( email )

LeBow College of Business
Philadelphia, PA 19104
United States
215.895.2117 (Phone)
215.895.2955 (Fax)

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