REITs’ Stock Return Volatility: Property Market Risk Versus Equity Market Risk

Lingxiao Li () and Bing Zhu ()
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Lingxiao Li: College of Business & Economics, California State University
Bing Zhu: Technical University of Munich

The Journal of Real Estate Finance and Economics, 2024, vol. 69, issue 3, No 3, 452-476

Abstract: Abstract This study addresses how and why the stock return volatility of REITs changes over time and identifies which mechanisms influence it at a firm level. Using U.S. equity REIT data from 1997 to 2018, we provide evidence that systematic risk and the underlying market for a REIT’s properties affect their stock return volatility. The results suggest that both equity and property markets can contribute to an increase in REITs’ stock return volatility. Portfolio diversification can reduce their sensitivity to property market risk. REITs with more asymmetric information and financial constraints are more vulnerable to property market risk.

Keywords: REITs; Return volatility; Property market risk; Equity market risk (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11146-022-09901-4

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