An application of the Fama–French three-factor model to lodging REITs: A 20-year analysis

This study applied the Fama–French three-factor model to model the returns of 33 US publicly traded lodging real estate investment trusts over a 20-year period. Results indicated that lodging real estate investment trusts that were significantly correlated with all the three factors had the greatest number of years in the market and the highest mean market capitalization, while those that were not significantly correlated with any of the three factors existed in the market for shorter periods and had the lowest mean market capitalization. Findings also indicated that the higher the market capitalization of real estate investment trusts, the more exposure they faced in the market. Results also suggest that the longer lodging real estate investment trusts existed in the marketplace, the greater their exposure to market risk. Overall, empirical results of this research are reasonably consistent with the Fama–French three-factor model as there is evidence of market, size, and book-to-value factors in the lodging real estate investment trusts market.