Geographic Focus and Systematic Risk in REITs

Brigitte Frutig and Prashant Das

ERES from European Real Estate Society (ERES)

Abstract: We examine how the systematic risk of large commercial real estate owners is associated with geographic diversification. In particular, we analyze time-varying equity betas and geographic exposure of publicly traded pure-play lodging REITs. Contrary to popular expectation, we find that stock investors perceive smaller risk in geographic focus rather than diversification. Further, regional focus becomes insignificant in reducing the risk if the focus expands beyond two or three regions. The findings are robust to multiple measures of geographic diversification. Our study re-affirms the impact of geographic focus in the context of commercial real estate as a risk minimization strategy.

Keywords: REIT; stock beta (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2017-07-01
New Economics Papers: this item is included in nep-rmg and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2017_369

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