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Performance differences in property‐type diversified versus specialized real estate investment trusts (REITs)
Author(s) -
Benefield Justin D.,
Anderson Randy I.,
Zumpano Leonard V.
Publication year - 2009
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/j.rfe.2008.04.001
Subject(s) - real estate investment trust , treynor ratio , equity (law) , diversification (marketing strategy) , financial economics , market timing , economics , alternative investment , real estate , sharpe ratio , econometrics , business , portfolio , actuarial science , monetary economics , market liquidity , finance , marketing , political science , law
Evidence from the corporate finance literature indicates that diversified firms trade at a discount to otherwise comparable specialized firms. However, very little research has addressed whether a similar diversification discount might exist in equity REITs that diversify across property types relative to those specializing in one property type. Using a sample of 75 equity REITs, the existence of a property‐type diversification discount is tested using standard Jensen's Alpha, Treynor Index, and Sharpe Ratio performance ranking methodologies over four commonly employed market proxies. Several variations of these standard tests are also utilized as robustness checks.