MARKET MICROSTRUCTURE AND REAL-ESTATE RETURNS

This paper examines the Real Estate Investment Trust (REIT) market mic rostructure and its relationship to stock returns. When compared with the general stock market, REIT stocks tend to have a lower level of in stitutional investor participation and are followed by fewer security analysts. In addition, REIT stocks that have a higher percentage of in stitutional investors or are followed by more security analysts tend t o perform better than other REIT stocks. Our results seem to confirm J ensen's (1993, p. 868) proposition that ownership structure (that is, who owns the firm's securities) affects the value of the firm. Our fin dings also have implications about the well documented phenomenon that the financial performance of Commingled Real Estate Funds (CREFs) is better than that of REITs.