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| Real Estate Risk and the Business Cycle: Evidence
from Security Markets Author: Lynne B. Sagalyn Start Page: 203 Abstract: This study reports on
the ex-post performance of survivor REITs and RECs over a 14.5-year period covering
several business cycles. The results show that the systematic risk and risk-adjusted
returns of REITs and RECs are quite different, especially during periods of low growth in
real GNP. Relative to the overall stock market, survivor REITs, in particular, equity
REITs, exhibited less volatility and higher returns than previous studies revealed. This
can be explained by the higher returns, lower volatility, and lower systematic risk of
REITs in periods of high growth in real GNP which have dominated the 1980s. The results
expand our understanding of the true volatility of real estate, highlighting, at the same
time, the need for further research to better understand the relationship between the
performance of equity REIT securities and the underlying real estate assets in their
portfolios. |
