An Analysis of the Cross Section of Returns for EREITs Using a Varying-Risk Beta Model

A dual-beta asset pricing model is employed to examine the cross-section of realized equity real estate investment trust ("EREIT") returns over bull and bear markets. No significant relationship is found between "EREIT" returns and a constant beta. However, beta explains cross-sectional returns when betas are allowed to vary across bull markets. This positive relationship exists for both January and non-January months. During bear-market months, no significant relationship is found between "REIT" betas and returns. But, during such months, size and book-to-market ratio are found to be negatively related to returns. Copyright American Real Estate and Urban Economics Association.