Dividend Policy and the Volatility of Real Estate Investment Trusts: Has Support for the Equity Duration Hypothesis Disappeared?

Craig Haberstumpf and Anita Pennathur

ERES from European Real Estate Society (ERES)

Abstract: We investigate the Equity Duration Hypothesis (EDH) utilizing dividend yield as a proxy for Equity Duration (ED) in the context of real estate investment trusts (REITs). Consistent with prior research, we find abundant evidence supporting the expectations of the EDH, i.e., that dividend yield has a negative correlation with volatility. However, we also find overwhelming contradictory and ambiguous evidence indicating that a previously strong negative relationship has disappeared, and a strengthening positive one has emerged. Although we found payers to be consistently less volatile than the very small number of nonpayers, the relationship between volatility and dividend yield appears unstable across time periods and within portfolios sorted on size, style, and other factors. Our results varied based on the measurement of dividend yield, with a more restrictive measure containing only regular quarterly dividends delivering results more supportive of the EDH than those of more inclusive measures.

Keywords: dividend policy; REITs; Volatility (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2025-01-01
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2025_188

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