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

Lingxiao Li, Bing Zhu

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

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.

Original languageEnglish
JournalJournal of Real Estate Finance and Economics
DOIs
StateAccepted/In press - 2022

Keywords

  • Equity market risk
  • Property market risk
  • REITs
  • Return volatility

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