TY  - JOUR
AU  - Chan,K.C.
AU  - Hendershott,Patric H.
AU  - Sanders,Anthony B.
TI  - Risk and Return on Real Estate:  Evidence from Equity REITs
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3311
PY  - 1991
Y2  - October 1991
UR  - http://www.nber.org/papers/w3311
L1  - http://www.nber.org/papers/w3311.pdf
N1  - Author contact info:
Patric H. Hendershott
Fisher Hall
Ohio State University
2100 Neil Avenue
Columbus, OH 43210
Tel: 218/963-1393
Fax: 218/963-9484
E-Mail: hendershott.2@osu.edu
AB  - We analyze monthly returns on an equally-weighted index of 18 to 23 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 discount on closed-end stock funds, consistently drive equity REIT returns: unexpected inflation and changes in the risk and term structures of interest rates. The impacts of these variables on equity REIT returns is around 60 percent of the impacts on corporate stock returns generally. As expected, the impacts are greater for more heavily levered REITs than for less levered REITs. Real estate, at least as measured by the return performance of equity REITs, is less risky than stocks generally, but does not offer a superior risk-adjusted return and is not a hedge against unexpected inflation.
ER  -