Abstract: REIT and REOC Systematic Risk Sensitivity

Volume 26, Number 3, 2004 of the Journal of Real Estate Research

REIT and REOC Systematic Risk Sensitivity

Natalya Delcoure
Assistant Professor of Finance
Department of Economics & Finance
Mitchell College of Business
University of South Alabama
Mobile, AL 36688
(251) 460-6718
(251) 460-6734 (fax)
ndelcoure@usouthal.edu

Ross Dickens
Associate Professor of Finance
Department of Economics & Finance
Mitchell College of Business
University of South Alabama
Mobile, AL 36688
(251) 460-6729
(251) 460-6734 (fax)
rdickens@usouthal.edu

Abstract: We examine the determinants and consequences of price clustering. Abstract: Real Estate Investment Trusts (REITs) and Real Estate Operating Companies (REOCs) seem to have different systematic risk levels even though both invest almost exclusively in real estate related assets. We find business risk to be negatively related to systematic risk, as measured by beta, for REITs, while REOCs? betas are positively related to agency costs. The two groups? betas also show differing sensitivity to real estate property type and regional location. REITs? systematic risk is also sensitive to financial leverage and financing form.