RT Journal Article
SR Electronic
T1 The Effect of Interest Rates on REITs Valuation and Future Returns
JF The Journal of Investing
FD Institutional Investor Journals
SP 87
OP 104
DO 10.3905/joi.2022.1.222
VO 31
IS 5
A1 Randy Anderson
A1 Eli Beracha
A1 Spencer Propper
YR 2022
UL https://pm-research.com/content/31/5/87.abstract
AB This article explores the relation between interest rates, REITs valuation, and future returns. Using a dataset on mortgage and equity REITs that spans the 1993–2019 time period, we investigate whether and to what extend nominal and real interest rates, as well as interest rate quality and term spreads, are related to the valuation of REITs, measured by different metrics, and REITs returns in the medium run. The results of our analysis show that interest rates are related to REITs absolute and relative valuation measures, but the sensitivity of REITs valuation to interest rates depends on their original valuation level. Moreover, we provide evidence that lower nominal interest rates and wide quality interest spreads are positively related to future REITs returns in the medium term.