Author: Edward Nelling and Joseph Gyourko

Start Page: 251
End Page: 268
Volume: 16
Issue Number: 3
Year: 1998
Publication: Journal of Real Estate Research

Abstract: This study examines the predictability of monthly returns on equity real estate investment trusts (EREITs) over the period 1975–95 and compares it with that for small- and mid-cap firms. Using the time series approach of Jegadeesh (1990), evidence is found that monthly EREIT returns are predictable based on past performance. However, the predictability is not substantial enough to cover typical transactions costs, so that there is no evidence of unexploited arbitrage opportunities.

The magnitude of EREIT predictability also is examined over different time periods, with the greatest amount found in the most recent data since 1992, which marks the emergence of the new wave of EREITs. Finally, persistence in individual REIT return performance is examined using a nonparametric technique. Limited evidence of persistence in performance is found, with retail-oriented REITs tending to exhibit the most persistence.