The Impact of the Revenue Reconciliation Act of 1993 on the Pricing Structure of Equity REITs

Tax legislation included in the Revenue Reconciliation Act of 1993 made large-scale investments in equity real estate investment trusts (REITs) more desirable to institutional investors. Other studies have observed an increased level of institutional ownership in REITs during the timeframe following passage of the act. Based on an analysis of equity REITs before and after passage of the Act, the present study finds that its passage coincided with a significant change in the role of unsystematic risk in the pricing of equity REITs.