The Performance of Acquisitions in the Real Estate Investment Trust Industry

Olgun Fuat Sahin ()
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Olgun Fuat Sahin: Minnesota State University Moorhead, 1104 Seventh Avenue South, 2070 Center for Business, Moorhead, MN 56563

Journal of Real Estate Research, 2005, vol. 27, issue 3, pages 321-342

Abstract: This study examines the performance of acquisitions in the Real Estate Investment Trust (REIT) industry around the acquisition announcement and in the long-run. The results suggest that the acquiring REITs experience statistically signi?cant negative abnormal returns while the target REITs earn statistically signi?cant positive abnormal returns during the three-day period around the announcement. The long-run performance of the acquiring REITs is analyzed using size benchmark portfolios with the buy-and-hold, cumulative average and mean calendar time abnormal returns, as well as the Fama–French Three Factor Model. None of the other methods detect signi?cant abnormal returns in the long-run with the exception of the buy-and-hold abnormal return. Further analysis shows that the long-run positive buy-and-hold abnormal return is consistent with an unexpected decline in cost of equity after acquisitions.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 2005
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