Author: PRATIK R BUGE.
MMS – Roll No.10.
Kohinoor Business School.
Literature Review.
Real Estate Investment Trust.
Pricing Callable Warrants on Housing REITs
Noah Schneider, et al. (2023), focuses on the pricing of callable warrants on housing REITs. The paper proposes a model for pricing callable warrants on housing REITs and tests the model using data from the US housing market. The authors find that the proposed model provides accurate pricing estimates for callable warrants on housing REITs. The study can be useful for investors and policymakers to understand the pricing of callable warrants on housing REITs and make informed investment decisions.
From an Emerging to a Consolidated European REIT Market
The Case of the Underpricing of Spanish Direct Listing REITs” by Castaño, Farinós,et al. (2023) in the journal Emerging Markets Finance and Trade, analyzes the underpricing of 41 Real Estate Investment Trusts (REITs) that went public in the Spanish market between 2013 and 2019. The study shows a significant underpricing on the initial day, even though none of the flotations were carried out through an Initial Public Offering but instead through a direct listing. The authors suggest that the study highlights the need for a consolidated European REIT market and the importance of analyzing the underpricing of REITs in emerging markets.
The Relationship between the Returns of REITs and ESG
Li, Mtezuka, et al. (2022), explores the relationship between the returns of Real Estate Investment Trusts (REITs) and Environmental, Social, and Governance (ESG) factors. The authors analyze the ESG scores of REITs and their financial performance data to explore correlations between ESG scores, returns, volatilities, and market value. The study uses a panel data regression model to observe individual companies through time and use company characteristics and ESG scores to explain stock performance. The article highlights the importance of ESG factors in the real estate industry and suggests that investors need to consider ESG factors while making investment decisions in REITs.
Informational Efficiency and GICS Classification: Evidence from REITs
Shinhua Liu, (2022), examines the impact of the Global Industry Classification Standard (GICS) system on the informational efficiency of pricing for Real Estate Investment Trusts (REITs). The study uses a large sample of publicly traded REITs and tests the hypothesis that the historical promotion of the real estate industry in the GICS system to a new headline sector should raise the informational efficiency of pricing for the asset class. The study finds that REIT returns become more random and less predictable following the event, suggesting better informational efficiency of REIT pricing. The article highlights the importance of GICS classification in the real estate industry and suggests that investors need to consider the impact of GICS classification on the informational efficiency of pricing for REITs while making investment decisions.
Corporate focus, residential assets, and the performance of French REITs
Beaubrun-Diant et al.(2022), examines the impact of corporate focus and residential assets on the performance of French Real Estate Investment Trusts (REITs). The study questions whether REITs holding residential assets perform better than REITs holding little or no residential assets for a given level of diversification. The authors use French data and do not detect any significant diversification effect on the performances of French REITs. The article highlights the importance of corporate focus and residential assets in the real estate industry and suggests that investors need to consider the impact of these factors on the performance of REITs while making investment decisions.
Employee productivity and REIT performance
Feng, Hardin,et al. (2022), examines the impact of employee productivity on the performance of Real Estate Investment Trusts (REITs). The study uses a sample of U.S. equity REITs from 2003 to 2017 and estimates parameters of a firm-level production function correcting for endogenous input choices. The study finds that the coefficient for labor input is statistically significant, indicating that employee productivity has a positive impact on REIT performance. The article highlights the importance of employee productivity in the real estate industry and suggests that investors need to consider the impact of employee productivity on the performance of REITs while making investment decisions.
Industry Concentration and U.S. REIT Returns
Zhang et al (2022), investigates the relationship between industry concentration and returns of Real Estate Investment Trusts (REITs) in the United States. The study fills the research gap and examines the impact of industry concentration on REIT returns, which has been omitted from industry concentration studies because REITs are unique, regulated companies. The authors find that industry concentration has a negative impact on REIT returns, suggesting that investors need to consider the impact of industry concentration on the performance of REITs while making investment decisions. The article highlights the importance of industry concentration in the real estate industry and suggests that investors need to diversify their portfolios to mitigate the negative impact of industry concentration on REIT returns.
The Restating of Financial Statements by REITs
Adams, et al. (2017), examines the restating of financial statements by Real Estate Investment Trusts (REITs). The study finds that REIT restatements occur for a large variety of accounting issues, with the most common being expense-related, such as leases and depreciation. The authors also find that the average market reaction for REIT restatements is negative 0.63%, which is less negative than non-REIT restatements. The article highlights the importance of financial reporting in the real estate industry and suggests that investors need to consider the impact of restatements on the performance of REITs while making investment decisions.
Multivariate Tail Risk Modelling for REITs
What Factors Drive Extreme?” by Oertel et al. (2022), examines the factors that drive extreme tail risk in Real Estate Investment Trusts (REITs). The study develops a method for assessing portfolio tail risk based on extreme value theory and applies separate estimations of univariate series to allow for closed-form expressions for Value at Risk and Expected Shortfall. The authors test the forecasting ability of the technique on a portfolio of U.S. stocks. The article highlights the importance of tail risk in the real estate industry and suggests that investors need to consider the factors that drive extreme tail risk in REITs while making investment decisions.
Institutional ownership and REIT acquisition
Huerta-Sanchez, et al. (2021), examines the relationship between institutional ownership and Real Estate Investment Trust (REIT) acquisitions. The study finds that REITs with relatively higher levels of pre-event institutional ownership are more likely to participate in acquisitions. The authors also find that levels of institutional ownership have a positive influence on both market and accounting performance, driven by increases in short-term and active institutional investor levels. The article highlights the importance of institutional ownership in the real estate industry and suggests that investors need to consider the impact of institutional ownership on the performance of REITs while making investment decisions.
Conclusion
A REIT (Real Estate Investment Trust) is a popular investment vehicle that allows individuals to invest in a diversified portfolio of income-generating real estate assets. REITs can offer several benefits, including diversification, liquidity, and potentially higher yields than other types of investments. REITs are required by law to distribute at least 90% of their taxable income to shareholders in the form of dividends, making them an attractive investment for income-seeking investors. However, as with any investment, there are also risks involved, such as the potential for loss of principal and fluctuations in market value.
The articles of a REIT typically refer to the legal document that outlines the specific details of the company’s structure, operation, and management, including provisions related to shares and stockholders, the board of directors, dividends, asset requirements, and amendment and termination procedures.
Overall, investing in a REIT can be a viable option for individuals looking to diversify their investment portfolio and generate income from real estate investments. However, it is important to conduct thorough research and consult with a licensed financial advisor before making any investment decisions.
References
ADAMS, J. C.; HAYUNGA, D. K.; RASMUSSEN, S. J.(2017) The Restating of Financial Statements by REITs. Journal of Accounting, Auditing & Finance, [s. l.], v. 32, n. 3, p. 350–371, 2017. DOI 10.1177/0148558X15607748. Disponível em: BEAUBRUN, D. K.; MAURY, T(2022). Corporate focus, residential assets, and the performance of French REITs. Bulletin of Economic Research, [s. l.], v. 74, n. 2, p. 599–621, 2022. DOI 10.1111/boer.12311. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=2095e35b-4abe-32b2-8bec-cdb20481b1ab. Acesso em: 12 maio. 2023.
CASTAÑO, L.; FARINÓS, J. E.; IBÁÑEZ, A. M.(2023) From an Emerging to a Consolidated European REIT Market. The Case of the Underpricing of Spanish Direct Listing REITs. Emerging Markets Finance & Trade, [s. l.], v. 59, n. 3, p. 921–936, 2023. DOI 10.1080/1540496X.2022.2119844. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=7517a2a9-7ff4-37f3-9656-1d3c9e293d7f. Acesso em: 12 maio. 2023.
FENG, Z.; HARDIN, W. G.; WU, Z.(2022) Employee productivity and REIT performance. Real Estate Economics, [s. l.], v. 50, n. 1, p. 59–88, 2022. DOI 10.1111/1540-6229.12307. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=9a7b6df2-4eea-38fb-ab54-5994df6c77dd. Acesso em: 12 maio. 2023.
https://discovery.ebsco.com/linkprocessor/plink?id=3348ec59-7a02-3f9b-abc6-9b40313182a4. Acesso em: 12 maio. 2023.
HUERTA-SANCHEZ, D.; NGO, T. N.; PYLES,(2021) M. K. Institutional ownership and REIT acquisitions. Applied Economics, [s. l.], v. 53, n. 36, p. 4207–4228, 2021. DOI 10.1080/00036846.2021.1897514. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=02cc568f-1fa9-3018-a5c2-8c7157c166a9. Acesso em: 12 maio. 2023.
LI, A.; MTEZUKA, O.; SUNG, H. (2022). The Relationship between the Returns of REITs and ESG. Real Estate Finance (Aspen Publishers Inc.), [s. l.], v. 39, n. 2, p. 14–25, 2022. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=889b4d96-1249-39e9-a60f-59bc78a921be. Acesso em: 12 maio. 2023.
OERTEL, C.; GROH, A.(2022) Multivariate Tail Risk Modeling for REITs: What Factors Drive Extreme Losses? Real Estate Finance (Aspen Publishers Inc.), [s. l.], v. 38, n. 4, p. 279–306, 2022. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=8f2f0501-4959-3c4f-ac39-b04f84d59042. Acesso em: 12 maio. 2023.
SCHNEIDER, N.; MDAKANE, S.; MOSWATHUPA, S.(2023) Pricing Callable Warrants on Housing REITs. Real Estate Finance (Aspen Publishers Inc.), [s. l.], v. 39, n. 3, p. 116–125, 2023. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=54d6e2c5-b927-3ad5-89e4-9f2775dc4bd3. Acesso em: 12 maio. 2023.
SHINHUA LIU.(2022) Informational Efficiency and GICS Classification: Evidence from REITs. Real Estate Finance (Aspen Publishers Inc.), [s. l.], v. 39, n. 2, p. 3–13, 2022. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=01015b66-d220-3bb4-9bcb-8b1d418955d4. Acesso em: 12 maio. 2023.
ZHANG, Y.; HANSZ, J. A. (2022). Industry Concentration and U.S. REIT Returns. Real Estate Economics, [s. l.], v. 50, n. 1, p. 247–267, 2022. DOI 10.1111/1540-6229.12278. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=b9332e9d-7364-394e-9768-1e94dfb9cb28. Acesso em: 12 maio. 2023.