50 Years of Real Estate Investment Trusts: An International Examination of the Rise and Performance of REITs

Abstract

In 1960, the U.S. Congress passed the Real Estate Investment Trust (REIT) Act to expand the investment universe beyond securities such as stocks and bonds. The REIT standard has been adopted in 34 countries. In this paper, we examine the evolution and performance of this international REIT market. As REIT markets mature, we find that standard asset pricing models become better suited to explain the stock price movements of REITs. Our results show that over the past decade REIT stock outperformance was highest in Europe, and related positively to firm size, the level of property type specialization, and geographic portfolio focus. Systematic REIT risk is highest among Asian REITs and is mainly a reflection of firm leverage, especially in recent years.