REITS' Price Reaction to Unexpected FFO Announcements

Posted: 9 Nov 2012

See all articles by Frank Gyamfi-Yeboah

Frank Gyamfi-Yeboah

Georgia State University

Alan J. Ziobrowski

Georgia State University - Department of Real Estate

Lisa Lambert

Georgia State University

Date Written: November 8, 2012

Abstract

This study examines the reaction of REIT prices to unexpected FFO announcements. Using both the traditionally constrained models and an unconstrained model, we find that the market reacts significantly when REITs announce unexpected FFO with a stronger response for positive than negative surprises. Also, we find that FFO explains significantly more variance in abnormal returns than net income supporting our conjecture that FFO, being more accurately reflective of cash flow, provides more useful information to investors than traditional GAAP measures. Our results are robust to different specifications. The results also suggest that the traditional approaches have been misspecified.

Keywords: REITs, FFO, Net income, Market reaction, Asymmetric response

Suggested Citation

Gyamfi-Yeboah, Frank and Ziobrowski, Alan J. and Lambert, Lisa, REITS' Price Reaction to Unexpected FFO Announcements (November 8, 2012). Journal of Real Estate Finance and Economics, Vol. 45, No. 3, 2012, Available at SSRN: https://ssrn.com/abstract=2172844

Frank Gyamfi-Yeboah

Georgia State University ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

Alan J. Ziobrowski (Contact Author)

Georgia State University - Department of Real Estate ( email )

P.O. Box 4020
Atlanta, GA 30303-4020
United States
404-651-2760 (Phone)
404-651-2760 (Fax)

Lisa Lambert

Georgia State University ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

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