The Beta Anomaly in the REIT Market

Jianfu Shen, Eddie C.M. Hui () and Kwokyuen Fan ()
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Eddie C.M. Hui: The Hong Kong Polytechnic University
Kwokyuen Fan: The Hong Kong Polytechnic University

The Journal of Real Estate Finance and Economics, 2021, vol. 63, issue 3, No 4, 414-436

Abstract: Abstract This research examined whether the beta anomaly exists in the REIT market. By analysing a low-minus-high beta strategy and a betting-against-beta strategy in the REIT market, we find that high-beta REITs earn significantly lower risk-adjusted returns than low-beta REITs. This beta anomaly is only significant in the New REIT Era after 1993. The negative relationship between beta and REIT stock return does not disappear after taking into account some firm characteristics, suggesting that the beta anomaly in the REIT market is not driven by beta’s correlation with profitability, asset growth, lottery-like return or the skewness of stock returns. We find that institutional investors, whose portfolios increasingly contain a significant proportion of REITs, prefer the high-beta REITs. The exposure of institutional investors to high-beta REITs could explain the beta anomaly in the REIT market.

Keywords: Beta anomaly; Leverage constraints; Institutional ownership; New REIT era (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (9)

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DOI: 10.1007/s11146-020-09784-3

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