Do Common Risk Factors in the Returns on Stocks and Bonds Explain Returns on Reits?
REAL ESTATE ECONOMICS, Vol. 25 No. 5, Summer 1997
Posted: 6 Jun 1997
The monthly returns on equity and mortgage real estateinvestment trusts (REITs) are analyzed over the period July1976 to December 1992. The results indicate that riskpremiums on equity REITs are significantly related to riskpremiums on a market portfolio of stocks as well as tothe returns on mimicking portfolios for size and book-to-market equity factors in common stock returns. MortgageREIT risk premiums are significantly related to the threestock market factors and two bond market factors in returns.Mortgage REIT shares also underperform by an average of 6.8%per year.
JEL Classification: R0
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