International Journal of Social Science and Business (IJSSB)

Applying a conditional expectation model on a large sample of equity REITs for the period 1977 through 2017, we document strong evidence of time-varying betas on systematic risk loadings. This finding is robust across REIT portfolios and suggests that corporate characteristics such as size and the book/market ratio are important determinants of REIT returns. We confirm that REIT returns are predictable before 1992 but not thereafter. In particular, we find that conditional risk loadings explain this predictability. Our findings suggest that the previously documented predictability of REITs using latent variables is not necessarily inconsistent with market efficiency.