REIT characteristics and the sensitivity of REIT returns

Previous research on the returns to real estate investment trusts (REITs) h as considered whether REITs are systematically exposed to general stock-mar ket risk and interest-rate risk. This study examines how the sensitivity of REIT returns to these factors may be influenced by various REIT characteri stics. Using a sample of publicly traded REITs, we estimate the sensitivity of REIT returns to stock market and interest-rate changes. We then propose and implement a model for testing whether differences in asset structure, financial leverage, management strategy, and degree of specialization in th e REIT portfolios are related to their sensitivity to interest rate and mar ket risk. Our results permit us to offer some inferences about how REITs ca n alter their risk exposure by managing these characteristics.