The Day of the Week Effect in Real Estate Investment Trusts

Abstract

Executive Summary. This study examines the behavior of real estate investment trust (REIT) returns surrounding the weekend. The results for equity REITs show that similar to equity securities, returns on Monday are positive when returns on Friday are positive and returns on Monday are negative when returns on Friday are negative. This same relationship does not hold for mortgage REITs. In addition, a significant first order autocorrelation pattern is observed for all REIT types around the weekend. The study also finds that REIT investors respond more strongly to information contained in the market's previous return rather than that contained in previous REIT returns. This implies that REIT investors may have a difficult time processing information about REIT securities and rely heavily on market information to make investment decisions.