Open AccessInternational Real Estate Review
Author(s) -
Ling He,
James. R. Webb,
Neil Myer
Publication year - 2003
Publication title -
journal of the asian real estate society
Language(s) - English
Resource type - Journals
ISSN - 1029-6131
DOI - 10.53383/100043
Subject(s) - bond , real estate investment trust , equity (law) , interest rate , financial economics , monetary economics , yield (engineering) , economics , explanatory power , corporate bond , real estate , business , financial system , econometrics , finance , philosophy , materials science , epistemology , political science , law , metallurgy
In order to identify effective interest rate proxies for equity and mortgage REITs, this study analyzes seven different interest rate proxies that have been widely used in the REIT literature. They are the monthly holding period returns on long-term U.S. government bonds and high-grade corporate bonds, the percentage changes in yields for long-term U.S. government bonds and high-yield (Baa) corporate bonds, the difference between returns on long-term U.S. government bonds and T-bill rates, the spread between yields on high-yield (Baa) corporate bonds and returns on long-term U.S. government bonds, and the spread between returns on high-grade corporate bonds and returns on long-term U.S. government bonds. The overall OLS results suggest that mortgage REITs are sensitive to all proxies, while equity REITs are significantly affected by only changes in yields on long-term U.S. government bonds and high-yield corporate bonds. The time variation paths for sensitivities indicate that all interest rate sensitivities are time specific. Overall, the changes in yields on high-yield corporate bonds (Baa) has the strongest explanatory power for returns of equity and mortgage REITs for most of the 27-year sample period (1972 through 1998).