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Do Common Risk Factors in the Returns on Stocks and Bonds Explain Returns on REITs?
Author(s) -
Peterson James D.,
Hsieh ChengHo
Publication year - 1997
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 - 10.1111/1540-6229.00717
Subject(s) - real estate investment trust , equity (law) , bond , financial economics , stock (firearms) , portfolio , economics , common stock , excess return , business , real estate , monetary economics , finance , geography , context (archaeology) , political science , law , archaeology
The monthly returns on equity and mortgage real estate investment trusts (REITs) are analyzed over the period July 1976 to December 1992. The results indicate that risk premiums on equity REITs are significantly related to risk premiums on a market portfolio of stocks as well as to the returns on mimicking portfolios for size and book‐to‐market equity factors in common stock returns. Mortgage REIT risk premiums are significantly related to the three stock market factors and two bond market factors in returns. Also, mortgage REIT shares underperform by an average of 6.8% per year.