An Analysis of the Impact of the Taxpayer Relief Act of 1997 on the Valuation of REITs and the Adverse Selection Component of the Bid/Ask Spread

Richard Ott and Robert Van Ness

Journal of Real Estate Portfolio Management, 2002, vol. 8, issue 1, 55-63

Abstract: Executive Summary. This study analyzes the impact of the Taxpayer Relief Act (TRA) of 1997 on Real Estate Investment Trusts (REITs). The findings indicate that there are no price effects on the day of passage (or on the day that the bill went into effect). The findings also indicate that there is no change in the unsystematic risk associated with REITs after the change. Additionally, the adverse selection component of the spread increases after the tax change. This is attributed to the uncertainty that the added managerial flexibility has added to REITs.

Date: 2002
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DOI: 10.1080/10835547.2002.12089653

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