Ben Stoller

Date of Award

Spring 2019

Degree Name

Bachelor of Science (BS)

Advisor(s)

N.K. Chidambaran

Abstract

This research begins with an exploration into real estate investment trusts, or REITs. REITs are companies with portfolios of real estate assets that they manage actively (or passively in rare scenarios). REITs are traded in equity markets throughout the world, such as the New York Stock Exchange and the London Stock Exchange. I look at how REITs can be used to predict what will occur within segments of the commercial real estate market. Past researchers have observed that REIT indices have moved with segment trends of the market before other indices in those corresponding segments. If REIT indices can be created that consistently lead private property transaction indices, investors and stakeholders in the commercial real estate market will benefit from the efficient data derived from the REIT returns. With data from the Center for Research in Security Prices (CRSP), I created a series of segment-specific and geographic-specific REIT indices and examine their performance over a quantified period. Since REITs are traded on equity markets, they theoretically trade based upon the efficient market hypothesis (EMH). According to EMH, asset prices reflect all information available. That results in REITs pricing in all conditions within the market, in addition to the information about each individual equity. The efficiency of REITs leads me to believe that they can lead other sources of commercial real estate data and can foresee a variety of trends within the market, such as an impending boom or boost within a sector or geography, and can have the possibility to predict trends for the entire commercial real estate market.

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