The Effect of the Real Estate Downturn on the Link between REITs and the Stock Market

Steven Simon and Wing Lon Ng

Journal of Real Estate Portfolio Management, 2009, vol. 15, issue 3, 211-219

Abstract: Executive Summary. We analyze the impact of the real estate/mortgage crisis on the dependence between the market for common stocks and returns on Real Estate Investment Trusts (REITs) using a flexible mixed-copula approach. We find that both before and after the outbreak of the recent financial crisis investing in REITs provides better protection against severe downturns of the stock market in the United States than a foreign common stock index. Moreover, the outbreak of the current crisis seems to (a) have little impact on the potential of REITs to provide protection against severe stock market losses, and, (b) have driven a wedge between the different types of REITs.

Date: 2009
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DOI: 10.1080/10835547.2009.12089848

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