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« Back to Results

REITs-1

Paper Session

Friday, Jan. 4, 2019 10:15 AM - 12:15 PM

Hilton Atlanta, 217
Hosted By: American Real Estate and Urban Economics Association
  • Chair: Eva Steiner, Cornell University

Real Estate News and REIT Returns

Erik Devos
,
University of Texas-El Paso
Gene Birz
,
Southern Connecticut State University
Sandip Dutta
,
Southern Connecticut State University
Desmond Tsang
,
Mcgill University

Abstract

In this study, we examine the effect of real estate news content on REIT returns. While findings in the general stock market usually show a greater market reaction to negative news, we find that REIT investors react predominantly to positive news and not to negative news about the real estate and housing market. We show that the content of positive real estate news has become significantly related to REIT returns in the modern REIT era with the REIT market offering greater diversification benefits, and that the impact is greater in recession periods when diversification is needed the most. We further find that the asymmetric market reaction to positive vs. negative real estate news is more apparent in REITs that report high rental income. Our findings imply that diversification benefits and rental income consideration could be the driving factors for REIT investor behavior.

Real Estate as a New Equity Market Sector: Market Responses and Return Comovement

Xiaoqing Xu
,
Seton Hall University
Hongfei Tang
,
Seton Hall University
Kangzhen Xie
,
Seton Hall University

Abstract

This study examines the market responses and return comovement between real estate and financial stocks around the reclassification of real estate firms from the financial sector to a standalone new real estate sector. We find that real estate stocks experience positive abnormal returns at the announcement of the new sector creation, and attract more investor attention after the announcement. More importantly, the comovement between real estate and financial stocks decreases dramatically after the new sector creation. These findings cannot be fully explained by the classical fundamental-based view and are consistent with a style-investing interpretation.

Debt Complexity and Firm Value: Evidence from United States REITs

Heidi Falkenbach
,
Aalto University
Alexey Zhukovskiy
,
Aalto University
Ranoua Bouchouicha
,
University of Reading

Abstract

In this paper we analyse whether debt complexity has a material effect on firm valuations due to higher expected costs of coordination failure among creditors in bankruptcy. Employing a sample of 215 U.S. equity REITs, we construct a HHI-index based measure of debt complexity and analyse the effect of debt complexity on Tobin’s Q. We find that higher debt complexity is associated with lower firm values, especially during recessions. The effect is economically and statistically significant and robust to alternative specifications.

Agree to Disagree: NAV Dispersion in REITs

Mariya Letdin
,
Florida State University
Stace Sirmans
,
Auburn University
Stacy Sirmans
,
Florida State University

Abstract

"This is the first study to analyze REIT Net Asset Value analyst coverage and dispersion. We find that NAV analyst coverage has a positive relationship with REIT value, as measured by Tobin's q and a negative relationship with REIT volatility. Subsequently we analyze NAV analyst estimate dispersion and find that it has a positive relationship with REIT leverage and volatility. We break down our sample by property type and find that retail REITs have the greatest NAV coverage and hospitality REITs have the greatest NAV analyst dispersion. Finally, we compare the significance of NAV forecast dispersion to earnings (FFO) forecast
dispersion. We find that NAV dispersion has a significant negative relationship with REIT value whereas FFO dispersion is not found to have a signicant relationship."
Discussant(s)
Gianluca Marcato
,
University of Reading
Roland Fuess
,
University of St. Gallen
Timothy Riddiough
,
University of Wisconsin
Shaun Bond
,
University of Cincinnati
JEL Classifications
  • G1 - General Financial Markets
  • G3 - Corporate Finance and Governance