Start Page: 26
End Page: 42
Volume: 26
Issue Number: 01
Year: 2004
Publication: Journal of Real Estate Research

Abstract: The diversification benefit provided by real estate investment trusts (REITs) is of great importance to investors, practitioners, and academics. This benefit critically relies upon the correlation properties between REIT returns and the factors used to explain REIT returns. Recent studies have documented an asymmetry of the market-beta of equity REITs based on high and low GDP growth states as well as in positive and negative monthly market excess returns. The asymmetry has been labeled a puzzle because attempts to explain the asymmetry have failed and because it persists after controlling for a number of known effects. This study helps to resolve this puzzle by including the Fama-French (1993) book-to-market factor into a model that controls for size and market returns.