1990
DOI: 10.1111/1540-6229.00531
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Risk and Return on Real Estate: Evidence from Equity REITs

Abstract: We analyze monthly returns on an equally weighted index of eighteen to twenty-three equity (real property) real estate investment trusts (REITs) that were traded on major stock exchanges over the 1973-87 period. We employ a multifactor Arbitrage Pricing Model using prespecified macroeconomic factors. We also test whether equity REIT returns are related to changes in the discount on closed-end stock funds, which seems plausible given the closed-end nature of REITs.Three factors, and the percentage change in the… Show more

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Cited by 300 publications
(200 citation statements)
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“…2. The empirical evidence is qualitatively similar to that documented by Chan et al (1990); the only difference is that size and book-to-market mimicking portfolios are controlled for in our tests. That is, REIT returns are positively related to both the return-based CLOSED proxy and to the premiums/discounts in closed-end funds.…”
Section: Resultssupporting
confidence: 72%
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“…2. The empirical evidence is qualitatively similar to that documented by Chan et al (1990); the only difference is that size and book-to-market mimicking portfolios are controlled for in our tests. That is, REIT returns are positively related to both the return-based CLOSED proxy and to the premiums/discounts in closed-end funds.…”
Section: Resultssupporting
confidence: 72%
“…3 Since public real estate investment trusts (REITs) are also closed-end funds whose shares are traded on secondary markets, it is not surprising that there is a long list of studies examining the effects of investor sentiment on REIT prices. Chan et al (1990) find that equity REIT returns are positively related to the percentage changes in the discounts of closed-end stock fund prices, but this linkage disappears when size-based mimicking portfolios are included in the authors' test specification. Barkham and Ward (1999) examine the net asset values (NAVs) of UK property companies and find that the interaction of noise trader and rational investors has utility in explaining property company discounts.…”
mentioning
confidence: 74%
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“…One of the earliest study done by Chan et al (1990) examined that there are three factors driven of REIT and general stock market: changes in the risk, term structure and unexpected inflation. They analyzed monthly returns on an equally weighted index of eighteen to twenty-three equity REITs that were traded on major stock exchanges over the 1973-1978 period.…”
Section: Literature Reviewmentioning
confidence: 99%
“…on commercial real estate markets (Chan et al, 1990;Karolyi & Sanders, 1999). Therefore, to incorporate measures for both domestic and global property return performance, an approach capable of controlling country specific systematic risk sources is required.…”
mentioning
confidence: 99%