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Uncertainty premia in REIT returns

Author

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  • Marton Lotz
  • Daniel Ruf
  • Johannes Strobel

Abstract

We provide a systematic study of how financial and real estate uncertainty affect the aggregate return performance of the U.S. REIT market from 1994 to 2017. A temporal causality analysis reveals a negative uncertainty impact on REIT returns. The asset pricing analysis confirms the predictive relation and suggests that REITs are statistically significantly exposed to changes in market‐wide uncertainty, for which investors require a return compensation. We also identify economic state variables to explain time‐varying uncertainty exposures as well as periodic hedging characteristics of REITs. Finally, we find evidence that the source of uncertainty matters for compensating expected REIT returns.

Suggested Citation

  • Marton Lotz & Daniel Ruf & Johannes Strobel, 2023. "Uncertainty premia in REIT returns," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(2), pages 372-407, March.
    • Handle: RePEc:bla:reesec:v:51:y:2023:i:2:p:372-407
    DOI: 10.1111/1540-6229.12423
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    References listed on IDEAS

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