Does the REIT Stock Market Resemble the General Stock Market?

Abstract

Gyourko and Keim (1993) point out that the continued growth of the Real Estate Investment Trust (REIT) market depends critically on the stock market's ability to provide fair and accurate valuations of real estate. Given the recent surge of REIT initial public offerings (more than $15 billion in the 1993-1994 period), it is important to know whether the stock market provides the REIT market with the same level of information dissemination, monitoring activities and pricing mechanisms as that for other stocks. This study demonstrates that, when compared with the general stock market, REIT stocks tend to have a smaller turnover ratio, a lower level of institutional investor participation, and are followed by fewer security analysts. Furthermore, the level of financial analysts coverage and stock turnover intensity are higher when the REIT stock market is “hot”. The lack of attention from financial analysts and institutional investors in the REIT stock market may have some implications for the well-documented anomalous REIT stock performance.

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