Publications
Aggregate Investment, Economic Dynamics, and Predictability in the U.S. REIT Market[SSRN Link]
Abstract: We investigate whether aggregate investment predicts future market returns in the U.S. equity REIT sector. During more than half a century from 1972 to 2023 encompassing both vintage and new REIT eras, we find that a one-standard-deviation increase in aggregate investment, measured as value-weighted annual operating asset growth, signals an approximate 5.6% lower expected annual excess REIT market return. This predictability is robust to extensive controls, including valuation ratios, interest rates, other corporate policies, and investor sentiment. Further analysis supports a primary role for time-varying risk premia, showing that aggregate investment covaries negatively with economic uncertainty and predicts future economic growth dynamics in a hump-shaped pattern. While sentiment effects are present, they appear secondary, and the predictability is mainly driven by debt-financed investment. Our findings validate the investment-CAPM framework for REITs and identify aggregate investment as a robust predictor of REIT market dynamics.
Working Papers
Expected Investment Growth and the Cross-Section of Expected Returns: Evidence from REITs[SSRN Link]
Abstract: We test the predictions of the dynamic investment CAPM by examining the role of expected investment growth in the cross-section of U.S. equity REIT returns. Constructing a robust out-of-sample forecast, we find that REITs with high expected growth earn significantly higher future returns. A long-short portfolio based on this forecast earns a significant premium of 0.51% per month in the 1998-2021 sample. We provide evidence for a novel, leverage-based economic mechanism for the premium: high-growth expectations lead to higher future financial leverage, which in turn amplifies firms’ systematic cash flow risk. Formalizing these findings, we propose an augmented investment-based four-factor model that includes our new factor. This model outperforms the benchmark Fama-French six-factor model in explaining prominent REIT patterns. We finally uncover that the expected growth premium is distinct from its counterpart in common stocks, highlighting the importance of sector-specific risk factors.
The Economics of Climate Talk in Real Estate: Real Effects and Financial Performance[SSRN Link]
Abstract: We investigate the economic consequences of corporate climate change dialogue using text-based exposure measures from earnings conference calls for U.S. public real estate industry. We find that this dialogue is a powerful leading indicator of tangible corporate transition actions. Higher regulatory exposure predicts future investment in certified green buildings and attracts tenants with superior environmental profiles. This transition, however, entails short-term costs. Higher opportunity exposure, in contrast, predicts a persistent decline in future operating and rental performance. While these cash flow risks are priced, leading to a subsequent significant valuation discount, higher opportunity exposure is associated with lower future realized stock returns, suggesting market underreaction to the severity of predictable cash flow decline. Our findings highlight the critical need for adaptive strategies that balance environmental goals with financial performance, especially as regulatory pressures and market expectations about sustainability continue to evolve.