Diversification in the Equity REIT Market
Date Issued
2009
Date
2009
Author(s)
Chen, Ming-Hsueh
Abstract
This doctoral thesis explores (1) “Investigation of the Structure of Dependence in REIT-Based Pure-Play Portfolios” and (2) “Financing and Diversification Strategies of Equity REIT Firms”.he first essay of this dissertation employs the pure-play method to explore the effectiveness of REIT managers’ diversifying their real estate portfolios geographically in reducing risks. Specifically, we derive property type and regional pure-play returns from security returns of equity REITs from 1999 to 2008. The historical pure-play indices help us evaluate the performance of specific REIT sectors and regions. Then, we employ copula functions for pure real estate indices that remove the compounding factors from each index. We find that there exists an asymmetric structure of dependence among pure-play property type indices in bull versus bear markets. In contrast, the structure of dependence between pure-play regional indices is obscure.he second essay of this dissertation expands on previous studies regarding the financial risk of equity real estate investment trusts (REITs) by focusing on the effects of property type and geographic (economic) diversification in terms of unlevered beta and financial leverage. We examine the interrelationships among the variables regarding the total risk of these firms and explore several research questions. First, we explore the association between property type as well as geographic (economic) diversification and unlevered beta. Second, we investigate the relationship between the level of diversification and REIT firm’s’ capital structure. Our evidence indicates that the measures of diversification for REIT firms do not help explain the variability of their unlevered beta. In contrast, the degree of economic diversification appears to serve as a variable to debt ratios.
Subjects
Pure-Play Method
Copula Model
Structure of Dependence
Diversification
SDGs
Type
thesis
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