Reits and Idiosyncratic Risk
16 Pages Posted: 3 Jan 2007
This study examines various determinants of idiosyncratic risk from the perspective of un-diversified REIT investors, managers holding options, other option holders, and arbitrageurs. Since real estate investment trusts (REITs) enjoy a unique organizational structure and tax status, the relevant determinants derived from the two-stage regression model are different from other industrial firms. Results suggest that efficiency, liquidity and earnings variability are the important determinants of idiosyncratic risk, whereas size and capital do not.
Keywords: REIT, real estate investment trust, option, earnings, idiosyncratic risk
JEL Classification: L85,D81,D82,D83,D84,D92,D61,D72,E27,E32,G11,G14
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