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Systematic Risk and Diversification in the Equity REIT Market
Author(s) -
Gyourko Joseph,
Nelling Edward
Publication year - 1996
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00701
Subject(s) - real estate investment trust , diversification (marketing strategy) , equity (law) , financial economics , business , real estate , systematic risk , stock market , equity risk , economics , finance , private equity , geography , context (archaeology) , archaeology , marketing , political science , law
This paper employs stock market‐based data to examine the systematic risk and diversification properties of publicly traded equity real estate investment trusts (REITs). A unique data sample is created by combining firm return data with information on their property type holdings and the location of their investments. The systematic risk of equity REITs appears to vary by the type of property in which they invest, with beta being significantly higher for retail‐oriented REITs than for REITs owning industrial and warehouse properties. In addition, the stock market data provides no evidence that REIT diversification across property types or broad geographic regions actually results in meaningful diversification as reflected in a standard market‐based measure—the R 2 from a simple market model regression.