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The Consequences of REIT Index Membership for Return Patterns

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  • Andrey Pavlov
  • Eva Steiner
  • Susan Wachter

Abstract

The impact of stock market index membership on Real Estate Investment Trust (REIT) stock returns is unclear. Returns may become more like those of other indexed stocks and less like those of their underlying properties. Taking advantage of the inclusion of REITs in major S&P indexes starting in 2001, we find that shared index membership significantly increases the correlation between REIT returns. However, index membership also enhances the link between REIT returns and the underlying real estate, consistent with improved pricing efficiency.

Suggested Citation

  • Andrey Pavlov & Eva Steiner & Susan Wachter, 2018. "The Consequences of REIT Index Membership for Return Patterns," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 46(1), pages 210-250, March.
    • Handle: RePEc:bla:reesec:v:46:y:2018:i:1:p:210-250
    DOI: 10.1111/1540-6229.12202
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