An Analysis of Central Drivers of REIT Returns

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Jordan Joyce, Class of 2020


Many researchers have questioned whether real estate investment trusts (REITs) can act as a hedge for inflation or whether REITs can act as a safe haven for investors in the event of economic downturn. However, many studies lack basic data analysis or timely data to determine the dependence of REIT returns on various economic factors. The goal of this study is to act as a meta-analysis to synthesize the relationship between REITs and several potential risk factors. This study will extend beyond the timeline of previous studies, and will examine the relationship of several hypothesized risk factors. The results of this study can help brokers in their future decisions to hedge REIT risk in a portfolio. This study will use the historical returns from the National Association of Real Estate Investment Trusts (NAREIT) as well as six indices. This study will also use both univariate regressions and multivariate regressions to analyze the relationship between REITs and mortgage REITs and each representative index

Comments from Mentors

Jordan required relatively little guidance with her research. She is highly motivated, hard-working, and intelligent. She carried out a thorough review of the literature dealing with Real Estate Investment Trusts (REITs) and gathered data to carryout empirical work. Jordan organized data on Treasuries, a stock market index, the consumer price index, an oil index, the unemployment rate and the levels of industrial production to examine what risk factors may impact REIT returns. She initially found significant relationships for several factors. However, the results from multi-variate regressions show that only stock market index factor and the treasury factor remain significant in REITs in general and only the market index remains significant when examining just mortgage REITs. In both cases, the consumer price index factor was not significant in a multi-variate setting. This finding is contrary to inflation hedging characteristics for real estate that is sometimes been reported by media outlets. Jordan independently gained these insights and learned to question reported relationships, which is fundamental for achieving new levels of knowledge.  Her strong work ethic, curiosity, and discipline will lead her to great success in real estate or any other areas she may decide to pursue. 

Dr. Mauricio Rodriguez

Jordan was a little intimidated by the statistics at first, but soon gained a great deal of confidence in what she was doing, and executed her study with competence and independence.

Dr. Steven Mann

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Neeley School of Business