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Predictability in Equilibrium: The Price Dynamics of Real Estate Investment Trusts
Author(s) -
Capozza Dennis R.,
Israelsen Ryan D.
Publication year - 2007
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/j.1540-6229.2007.00200.x
Subject(s) - predictability , real estate investment trust , economics , equity (law) , real estate , transaction cost , financial economics , leverage (statistics) , momentum (technical analysis) , monetary economics , microeconomics , finance , machine learning , political science , computer science , law , physics , quantum mechanics
This research hypothesizes that, in markets where information costs, transaction costs and the economic impact of information can vary widely, we should expect predictability to vary systematically. We test this hypothesis with data on equity real estate investment trusts (REITs) from 1985 to 1992. We document that levels of predictability vary with firm characteristics like leverage, size and focus. Momentum is stronger for larger, more levered REITs. Reversion is faster for focused, levered REITs. The results are consistent with the hypothesis that, in equilibrium, securities, where information is either less costly to acquire or has less impact on fundamental value, should exhibit less predictability.