Does property-type diversification in REITs provide superior risk-adjusted returns if compared to specialized REITs? Evidence from the U.S. during different market conditions

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dc.contributor Aalto-yliopisto fi
dc.contributor Aalto University en Oikarinen, Katja 2015-12-16T08:18:08Z 2015-12-16T08:18:08Z 2015
dc.description.abstract OBJECTIVES OF THE STUDY: The aim of this study is to analyze the performance differences between different types of real estate investment trusts (REITs). In particular, I examine property-type diversification i.e. whether the stock market performance of diversified REITs differs significantly from specialized REITs. Additionally, I investigate whether performance differences are related to certain market conditions. Compared to the past studies, this study uses longer time span, latest data available, wider set of REITs, different methods for portfolio construction and more comprehensive calculations for performance measures. Also the implications of financial crisis are included. DATA AND ANALYSIS: The data set consists of 224 equity REITs: 176 classified as specialized and 48 as diversified. The time period for this study is from 2002 to 2015 including three sub-periods that present different market conditions. The study utilizes several performance ranking methods to investigate the performance differences between specialized and diversified portfolios. Sharpe ratio, Treynor Index, and Jensen's Alpha are computed based on total return data retrieved from Bloomberg. The statistical significance of performance differences is then studied with two-sample t-test, Wilcoxon rank-sum test, and Wilcoxon signed-rank test. FINDINGS OF THE STUDY: The results provide strong evidence that the diversified REITs outperform the specialized counterparts based on the superior risk-adjusted returns. The study also shows that the financial crisis of 2007-2009 strongly affects REIT returns. However, the assumed outperformance of specialized REITs during the crisis period cannot be identified. The superiority of the diversified portfolio can be partly explained by larger market capitalization (size), lower debt level, lower total operating expenses, and higher dividend yields. en
dc.format.extent 83
dc.language.iso en en
dc.title Does property-type diversification in REITs provide superior risk-adjusted returns if compared to specialized REITs? Evidence from the U.S. during different market conditions en
dc.type G2 Pro gradu, diplomityö fi Kauppakorkeakoulu fi School of Business en
dc.contributor.department Rahoituksen laitos fi
dc.contributor.department Department of Finance en
dc.subject.keyword real estate investment trust
dc.subject.keyword REIT
dc.subject.keyword diversification
dc.subject.keyword diversified
dc.subject.keyword specialized
dc.subject.keyword performance difference
dc.subject.keyword risk-adjusted return
dc.identifier.urn URN:NBN:fi:aalto-201512165824
dc.type.dcmitype text en
dc.programme.major Finance en
dc.programme.major Rahoitus fi
dc.type.ontasot Master's thesis en
dc.type.ontasot Pro gradu tutkielma fi
dc.subject.helecon rahoitus
dc.subject.helecon financing
dc.subject.helecon sijoitusrahastot
dc.subject.helecon investment funds
dc.subject.helecon kiinteistöt
dc.subject.helecon real estates
dc.subject.helecon hajautus
dc.subject.helecon decentralization
dc.subject.helecon keskitys
dc.subject.helecon concentration
dc.subject.helecon tuotto
dc.subject.helecon rate of return
dc.subject.helecon riskienhallinta
dc.subject.helecon risk management
dc.ethesisid 14205 2015-12-04
dc.location P1 I

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