Real estate investment trusts during market shocks: Impact and resilience

Abstract

The market value of a stock is a function of firm performance and market sentiment. Specific events can alter returns and present several challenges to market performances. Through an event study design, this study examines five real estate investment trusts (REITs) market indices’ responses to market shock from the initial COVID-19 outbreak. The results revealed negative cumulative abnormal returns for lodging, health care, and retail REITs over the 20-day trading window. Considering their lower drawdown losses, the remaining REIT sectors showed greater resilience than their counterparts. Block bootstrapping confirmed the returns were significantly worse for all sectors, with retail and lodging sectors having the poorest returns. This study advances the literature on pandemic-related market crashes along with how COVID-19 affected cross-sector REIT equities compared to other market indices. REIT firms can use the findings to develop more effective policy measures as responses to pandemic market conditions.

Navigating Real Estate Investment Trust Performance Dynamics: The Role of Style (Equity vs. Mortgage Real Estate Investment Trusts) and Diversification Amidst the COVID-19 Pandemic

“…REITs serve as a hedge against inflation due to their dividend growth exceeding inflation. COVID-19 adversely affected the performance of REITS although the impact was asymmetric across different property types (Chiu et al 2020;Akinsomi 2021;Cai and Xu 2022;Salami et al 2023;Ampountolas et al 2023).…”