Short-Term REIT Performance under Pandemic Conditions

Abstract

The Corona virus pandemic and the subsequent economic slowdown provide an opportunity to examine the relative performance of US REITs during a period of extreme market disruption. We investigate the short-term response of US REITs during this period by employing event study methodology with four market models and three distinct pandemic related event dates. In order to examine the performance across market sectors the returns on REIT indexes are considered instead of individual REITs. The empirical results provide additional evidence with respect to the performance of REITs relative to the overall market and the benefits derived from including REITs in a portfolio during adverse market conditions.

Keywords:

• REIT
• event study
• pandemic
• black swan

JEL Classification::

• R3
• R330

Notes

1 https://fraser.stlouisfed.org/timeline/covid-19-pandemic

2 https://www.spglobal.com/marketintelligence/en/

3 https://wrds-www.wharton.upenn.edu/

4 https://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html

5 Formulas not provided, as they are standard and well established in literature

6 We also ran our tests with Fama-French-Carthart model with a fourth factor, momentum, but the results did not significantly change. Results are available on request.

7 See Brown and Warner (1980), Brown and Warner (1985) and Patell (1976, 1979).

8 R² for all regressions for one factor and FF three factor model are available on request.