Author: Youguo Liang and James R. Webb

Start Page: 461
End Page: 470
Volume: 10
Issue Number: 4
Year: 1995
Publication: Journal of Real Estate Research

Abstract: Using tax-qualified mortgage REITs over three periods (1976-79, 1980-82, and 1983-90), this paper investigates the pricing of interest-rate risk for mortgage REITs at equilibrium. A system of nonlinear equations is estimated to determine the monthly interest-rate risk premium over each of the three time intervals. There is evidence to support the hypothesis that interest-rate risk is not diversifiable and hence commands a risk premium.