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Navigating Real Estate Investment Trust Performance Dynamics: The Role of Style (Equity vs. Mortgage Real Estate Investment Trusts) and Diversification Amidst the COVID-19 Pandemic

Author

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  • Ankita Damani

    (Department of Business Administration, College of Business, Auburn University at Montgomery, Montgomery, AL 36117, USA)

  • Anh Tuan Nguyen

    (Department of Economics and Finance, The Business School, Saigon South Campus, RMIT University, Ho-Chi-Minh City 700000, Vietnam)

  • FNU Pratima

    (Department of Accounting and Finance, Texas A&M University-Commerce, College Station, TX 75429, USA)

Abstract

In this paper, we investigate the impact of COVID-19 on different performance measures and the risk of US Real Estate Investment Trusts (REITs) with different styles. Our findings suggest a phenomenon with compelling evidence of reduced performance without any significant changes in risk profile amidst the COVID-19 pandemic. Particularly, mortgage REITs (MREITs) appear to be more adversely affected compared to equity REITs (EREITs). We further explore and analyze the performance of specialized REITs in contrast to diversified REITs in the distinctive conditions presented by COVID-19. We find that diversification creates value for the entire sample period, whereas, during the COVID-19 pandemic, property type specialization helps, although the results are weakly significant. The findings on risk suggest investors’ short-run outlook on market reaction. These results remain robust to additional tests. The implications provide insight for investors as a reference to reallocate assets in their portfolios during uncertain times.

Suggested Citation

  • Ankita Damani & Anh Tuan Nguyen & FNU Pratima, 2024. "Navigating Real Estate Investment Trust Performance Dynamics: The Role of Style (Equity vs. Mortgage Real Estate Investment Trusts) and Diversification Amidst the COVID-19 Pandemic," JRFM, MDPI, vol. 17(5), pages 1-18, May.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:5:p:202-:d:1393435
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    References listed on IDEAS

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    1. James L. Kuhle & Carl H. Walther & Charles H. Wurtzebach, 1986. "The Financial Performance of Real Estate Investment Trusts," Journal of Real Estate Research, American Real Estate Society, vol. 1(1), pages 67-75.
    2. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    3. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
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