Does default risk matter for investors in REITs

We investigate the relationship between default risk and REIT stock returns. A default risk long-short investment strategy generates a return of 15% per annum. We also evaluate a large number of potential explanations for the negative relationship between default risk and subsequent stock returns. W...

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Veröffentlicht in:	International journal of strategic property management 2020-09, Vol.24 (5), p.365-378
1. Verfasser:	Sha, Yezhou
Format:	Artikel
Sprache:	eng
Schlagworte:	anomalies cross-sectional return Default default risk distress puzzle Investment policy Management Rates of return Real estate real estate investment real estate investment trust (reit) REITs Risk premiums Stock prices
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Beschreibung
Zusammenfassung:	We investigate the relationship between default risk and REIT stock returns. A default risk long-short investment strategy generates a return of 15% per annum. We also evaluate a large number of potential explanations for the negative relationship between default risk and subsequent stock returns. We do not find robust evidence that the default risk premium can be explained by firm size, book-to-market equity, asset growth and idiosyncratic volatility. However, CAPM beta shows some promise in explaining the default risk premium. Our results shed further light on the role of default risk in investment in REITs.
ISSN:	1648-715X 1648-9179
DOI:	10.3846/ijspm.2020.13504