The Consequences of REIT Index Membership for Return Patterns
49 Pages Posted: 20 Sep 2016 Last revised: 21 Feb 2023
Date Written: June 26, 2017
Abstract
The impact of stock market index membership on 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.
Keywords: Real Estate, Investment, Index Membership, REITs
JEL Classification: R3, G14, G11, G12
Suggested Citation: Suggested Citation