Richard J. Buttimer, Jun Chen and I‐Hsuan Ethan Chiang
The purpose of this paper is to study performance and market timing ability of equity real estate investment trusts (REITs).
Abstract
Purpose
The purpose of this paper is to study performance and market timing ability of equity real estate investment trusts (REITs).
Design/methodology/approach
The authors use classical regression‐based framework and their multi‐index, multifactor, and conditional extensions to jointly detect asset selectivity and market timing ability of equity REITs and their subcategories. These results are then validated by a nonparametric test.
Findings
It is found that equity REITs in aggregate have some housing market timing ability. Various equity REIT subcategories perform differently: office REITs can discover underpriced properties, while retail, industrial, and office REITs have poor timing ability. Nonparametric tests confirm that equity REITs do not have ability to predict real estate market movements.
Originality/value
Research in REIT performance evaluation is still limited to the asset selectivity aspect. This paper intends to fill this gap by providing empirical evidence of market timing ability of equity REITs using an array of parametric and nonparametric methods.