A New Era: Real Estate Industry in the S&P 500 Index
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A New Era: Real Estate Industry in the S&P 500 Index*
By: Erik Lam and Dogan Tirtiroglu**
This Draft: September 13, 2005
* Please do not quote without the permission of the authors. This version is preliminary and is based
on Erik Lam’s Master of Philosophy dissertation, supervised by Dogan Tirtiroglu, at the University
of Cambridge, Department of Land Economy, 2004-2005.
** Contact author. Please send your comments to: Dr. Dogan Tirtiroglu, University of Cambridge,
Department of Land Economy, 19 Silver Street, Cambridge CB3 9EP, UK; email:
dt259@cam.ac.uk; Tel: +44-1223-337141.A New Era: Real Estate Industry in the S&P 500 Index
By: Erik Lam and Dogan Tirtiroglu
Abstract. On October 3, 2001, Standard and Poor's announced that Equity Office Properties (EOP), a
U.S.-based Real Estate Investment Trust (REIT), would be included in the S&P500 Index. This was
the first time that the real estate industry was included and represented in this most fundamental
stock market index. This paper explores the wealth effects of this historic announcement across
various types of US.-based publicly traded real estate companies. Using an event-study, we find
evidence of an overall positive shareholder wealth effect across various publicly-traded real estate
companies.
Introduction
At 5.15pm (ET), Wednesday October 3rd 2001, Standard and Poor’s (S&P’s) announced that
Real Estate Investment Trusts (REITs) were eligible to be included in its US indices. Specifically,
Equity Office Properties Trust (EOP), Hospitality Properties Trust (HPT), New Plan Excel Realty
Trust (NXL), Kilroy Realty Corp. (KRC), Shurgard Storage Centers (SHU), and Colonial
Properties Trust (CLP) were to enter their respective S&P’s indices after the close of trading on the
9th of October, 20011. The stock market responded positively to this announcement. At the end of
trading on the 4th of October, the Morgan Stanley REIT index rose from 384.38 to 389.19, gaining
approximately 1.25% 2 . Many market commentators from that day forth hailed the event as a
milestone for the REIT industry – a ‘badge of legitimacy’ needed for REITs to attract to a wider
investment audience3.
This paper’s primary aim is to provide answers to these following research questions: (i) did
the S&P’s announcement have positive wealth effects for shareholders?, (ii) if so, which REITs
particularly benefited?, (iii) is there an association between positive wealth effects and basic REIT
characteristics?, and (iv) were they any spillover effects due to the announcement?
As far as the authors are aware, there exists no previous study that has comprehensively
analysed this landmark event. This paper hopes to fill in this void. By employing a standard event-
study technique in the spirit of O’Hara and Shaw (1990), this study hopes to investigate possible
shareholder wealth effects. Afterwards, Ordinary Least Squares (OLS) regressions are performed to
ascertain whether this event’s effects are correlated with variables of interest (e.g. REIT market
capitalisation). These regressions perhaps will give us some indication of which shareholders
benefited most from the S&P’s announcement. The results reported in this draft are preliminary as
1
The full S&P’s statement can be found in Appendix A.
2
This was less than a month after the 9/11 terrorist attacks which caused broad stock market valuations to fall by a large
margin.
3
For example, it was noted that “While the inclusion of REITs in the S&P 500 – a move long awaited by REIT industry
participants – is a step forward for EOP, it also represents a giant leap for the REIT sector as a whole…” National
Mortgage News (05/11/2001).
2we are undertaking certain robustness tests. Needless to say, one should interpret current draft’s
results with a degree of reservation.
This paper is broken down into 4 sections: Section 1 puts the S&P’s announcement into
context, Section 2 examines previous literature that has documented the wealth effects of adding a
firm into the S&P 500 Index and how spillover may occur in reaction to certain events. Section 3
develops hypotheses and provides a discussion of the event-study methodology and elaborates on
potential data and estimation hurdles for our event. Section 4 discusses the results. Finally, this
paper ends with the conclusions.
1. The S&P’s announcement: Putting it into context
To understand the significance of the S&P’s announcement, this paper seeks first to provide
a brief history of REITs to help put the announcement and REITs into context. The next section
puts forward the main reasons for the turnaround in S&P’s policy regarding REITs. After that, a
brief explanation of why S&P’s index inclusion is important to REIT (or other) investors. Finally,
Part 1 ends with a discussion on the information content and subsequent possible effects embedded
in the S&P’s announcement.
History of REITs
REITs have come a long way since their inception in the 1880s4. REITs are now able to own
real estate, operate real estate and even engage in real estate related business – a far cry since REITs
were initially created to be passive investment vehicles. Essentially, being a REIT affords certain
advantages, for example: (i) a single level tax treatment, (ii) other tax advantages, and (iii) limited
liability. REITs, however, are also subject to distinctive restrictions that make sure they are
accessible to investors – large and small – and maintain an element of ‘passiveness’. For instance,
to achieve REIT status in the Unites States (US), a REIT must annually distribute more than 90%5
of its taxable income to its shareholders. Also, a REIT must own and develop real estate assets with
the aim of acquiring an operating income (say, income derived from rents or mortgage interest
payments) from their property portfolio, rather than own and develop for short term property
trading interests. Once these and other conditions6 are met, REITs are able to remit their taxable
income and thus owe no corporation tax to the Government. Since only dividends and capital gains
4
www.reitnet.com/reits101/history.phtml (last accessed on 6th of June, 2005)
5
On January 1st, 2001, the REIT Modernisation Act of 1999 went into effect lowering the dividend distribution
requirement from 95% to 90%. The passing of this Act was most probably a positive factor for the S&P Index
Committee when they were deliberating whether or not to allow REITs into their US indices.
6
More detail regarding REIT status requirements can be found in Geltner and Milller (2001; pp. 636).
3incurred are subject to taxation, a REIT is exempt from ‘double taxation’ – corporate taxation and
individual income taxation.
The history of REITs, as mentioned previously, dates back as far as the 1880s and were
designed such that investors were able to invest in real estate and avoid double taxation. However,
REITs’ exemption from double taxation was overturned in the 1930’s and remained so, until in
1960, President Eisenhower signed the REIT Tax Provision Act, which re-established REITs’
original exemption from double taxation7. From the 1960’s onwards, REITs were primarily seen as
passive investment vehicles – simple pass-through entities – such that investors of all kinds were
able to invest in the real estate market through public stock. However, during the past 30 years,
changes in the legal environment have made REITs adapt; making them more like the active
operating REITs we see today. For example, major Acts passed during that time in the US were: (i)
the removal of some real estate tax shelters in the 1980’s, (ii) the introduction of the Tax Reform
Act (1986) which allowed REITs to directly operate their properties, (iii) the allowing, in 1993, of
pension funds to invest in REITs, and (iv) the passing of the REIT Modernisation Act (1999) which
lowered the dividend requirement to 90% (from 95%) and permitted, under certain rules, REITs to
perform real-estate related business.
With this legal backdrop, REITs also went through major changes in structure and
management organisation. Previously, many REITs were externally managed. However, it
transpired to be a poor management organisational form8. As a result of this, and other factors, the
majority of REITs today are internally managed. REITs also struggled to find a suitable form until
the early 90’s. In the 1980’s, the dominant real estate investment vehicle were the syndicated Real
Estate Limited Partnerships (RELPs). It was a culmination of the severe collapse of these RELPs9 in
late 80’s and the creation of the Umbrella Partnership (UPREIT) structure in the early 90’s that
paved the way for REITs to flourish. The UPREIT structure provided REITs financial flexibility.
REITs were now allowed the possibility of not owning the underlying real estate assets, which gave
them the option of when to meet their tax liabilities 10 (Geltner and Miller, 2001). Today, the
majority of REITs are organised as an UPREIT and this structure has certainly helped REITs
become a more ‘mainstream’ real estate investment vehicle.
As mentioned above, REITs over the decades have experienced numerous changes in their
legal environment, internal structure and management organisational form. REITs, as a result, have
experienced phenomenal growth over these past 15 years. Before the S&P’s announcement, total
7
www.reitnet.com/reits101/history.phtml (last accessed on 6th of June, 2005)
8
Extensive studies have found that externally managed REITs underperformed internally managed ones. More details
can be found in Capozza and Seguin (2000).
9
Mainly because of the Tax Reform Act (1986) which ended the tax shelters afforded to RELPs.
10
This is in stark contrast with the previous ‘traditional’ REIT structure of the past whereby the REIT directly owned
the assets.
4REIT market capitalisation had grown from $10 billion in 1990 to around $285 billion in 2000, with
the number of REITs increasing from 58 to 16511. There were (and still are) a multitude of REITs of
which some: (i) owned, (ii) invested in, (iii) developed, (iv) managed, and (v) financed real estate.
In addition, there were REITs that concentrated on (to name a few): (i) the office market, (ii) the
residential market, (iii) the retail market, (iv) the industrial market, and (v) geographical areas.
Mortgage
REITs Hybrid REITs
$1.6 billion $2.9 billion
Equity REITs
$135.4 billion
Figure 1: Breakdown of total REIT market capitalisation as of the 9th of September 200012
As can be seen in the above diagram, there are 3 types of REITs13: Mortgage, Equity, and
Hybrid. Equity REITs14 own real estate and earn income from rents from their property portfolios.
Mortgage REITs lend money to real estate players and derive their income from interest earned on
money lent. Lastly, Hybrid REITs are an amalgamation of Equity REITs and Mortgage REITs. On
September 19th 2000, Equity REITs, Mortgage REITs, and Hybrid REITs accounted for 97%, 1%
and 2%, respectively, of total REIT capitalisation.
To summarise, due many changes mentioned previously, REITs have grown phenomenally
over these past 15 years. In 2001, total REIT capitalisation was approximately 3% of total US
capital market capitalisation. Furthermore, REITs are becoming very much like operating
companies: a far cry from what REITs were in the past. The next section highlights the main
reasons for the turnaround in S&P’s policy.
Why did S&P change its mind about REITs?
The previous policy of S&P’s was that REITs were essentially, as mentioned in the previous
sections, passive investment vehicles and that the REIT sector was not regarded as ‘mainstream’ in
11
Salomon SmithBarneyEquity Research: REITs. September 19, 2000.
12
Source: NAREIT and SalomonSmithBarney.
13
This paragraph follows closely the SalomonSmithBarney Equity Research: REITs: September 19th 2000.
14
This paper is primarily centred on this type of REIT.
5the US economy. These two factors barred them from being considered for S&P’s index inclusion.15
However, favourable changes in Acts governing REITs, growth of REIT market capitalisation, the
increasingly active nature of REITs and dogged pressure from industry leaders, such as Sam Zell16,
all culminated into the S&P’s Index Committee reversing its policy. In its press statement, S&P’s
basically cited two main reasons to explain its decision turnaround. Firstly, some REITs can no
longer be viewed as the passive investment vehicles of yesteryear and behave more like operating
companies. Secondly, because S&P’s goal is to make its indices reflect the US economy as much as
possible, it felt that the growth and importance of REITs warranted inclusion. S&P’s also argued
that even though REITs are subject to different tax treatments as compared to normal operating
companies, it felt that inclusion was justified considering that other sectors, such as utilities and
natural resource companies, also have differing tax treatments.
Why was the S&P’s statement considered so important?
Before the S&P’s announcement, the REIT industry was considered relatively small and an
unattractive area to invest in. Throughout its existence from the 1960s to the early 1990s it was
often overlooked by Wall Street 17. As mentioned previously, possible reasons why include: the
dominance of the RELPs, REITs being passive investment vehicles and, in 1990, a total REIT
market capitalisation of around $10 billion – small when compared to the overall real estate sector,
let alone the US economy. However, due to a number of factors, REITs grew phenomenally from
the early 1990s onwards and the subsequent S&P’s announcement was naturally seen as a
‘milestone’ – a symbol of what REITs had achieved and a harbinger of good things to come18.
Not only did S&P’s recognise that REITs had changed sufficiently to warrant inclusion into
their indices19, they also allowed EOP – the flagship REIT - into their most prestigious index: The
S&P 500. This event was considered important because the S&P 500 attracts much investor and
media attention. For example, in 2001, around $1 trillion of index funds tracked the S&P 50020.
Furthermore, the S&P 500 has gained a reputation of being ‘hard to beat’ in the long term and is
considered the ‘benchmark’ index that represents the US economy.
EOP’s inclusion into the S&P 500 was met with much media applause with many
newspaper articles proclaiming that the 3rd of October would be a day not easily forgotten. Fred
15
The full press report can be found in Appendix A.
16
“…Mr. Zell who is seen as the lead spokesman for the REIT industry and passionately insisted that the REIT (Equity
Office Properties) be included in the S&P 500” The Daily Deal (08/10/2001).
17
The Daily Deal (08/20/2001)
18
Moreover, the S&P’s announcement helped highlight to investors REIT’s apparent high yield, low risk characteristics.
Against the backdrop of the 9/11 terrorist attacks and where investors were flooding into stocks such as utilities, oil,
defence companies, etc, this announcement may have helped REITs further.
19
Inclusion into the S&P MidCap 400 and the S&P SmallCap 600 was deemed important, but not as important as
inclusion into the S&P 500. As such, this section only highlights the importance of S&P 500 inclusion.
20
Furthermore, 97% of US money managers use this Index. National Mortgage News (05/11/2001).
6Carr, Principal for Penobscot Group Inc21, said “…It (the S&P’s announcement) is a great thing for
Equity (Office Properties) and for REITs generally… It will bring fairly new class of investors into
Equity Shares, and is an endorsement that REITs are a mainstream industry, fully worth being in the
S&P 500…It’ll put REITs on the screen in front of other general investors that have not looked at
REITs before”. While Sam Zell, CEO of EOP, said in a statement “We feel it is a significant
milestone that S&P has recognised the REIT industry across all of its indices, and we acknowledge
their efforts”22.
In short, the S&P’s announcement was considered important because it had the potential to
have far-reaching consequences. The next section deals with the specific information content of the
announcement and explores any potential effects it may have had.
What was the information content of the S&P’s announcement?
The information content of the S&P’s announcement on the 3rd of October, 2001 can be
broken down into four effects23: (i) S&P’s candidature effects, (ii) potential S&P’s candidature
effects, (iii) potential intra-industry spillover effects, and (iv) potential inter-industry spillover
effects.
Firstly, the announcement explicitly mentioned Equity Office Properties, Hospitality
Properties Trust, New Plan Excel Realty, Kilroy Realty Corp, Shurgard Storage Centers and
Colonial Properties Trust. These REITs should clearly be affected (the so-called S&P’s candidature
effects). Secondly, it is an interesting possibility that those REITs, not explicitly mentioned, but
exhibit characteristics similar to the candidate REITs, may also be affected by the announcement
(the potential S&P’s candidature effect). To elaborate, market pundits had a fair idea of the possible
candidates (to name a few: Equity Residential, Simon Property Group) that maybe able to join the
S&P 500 index at a later date – this could have been factored in their stock prices immediately after
the S&P’s announcement. Thirdly, the S&P’s announcement should have an effect on the REIT
industry as a whole. Those real estate companies that were structured as REITs stood to benefit
from this statement 24 . Fourthly, a compelling possibility is that there may exist inter-industry
spillover effects from the announcement. There is the prospect that other real estate investment
vehicles that were trading on stock exchanges may have benefited from this announcement. For
example, real estate operating companies (REOCs), such as Trizec Properties25 and Hilton Hotels,
21
Commercial Property News (01/11/2001).
22
The Daily Deal (08/10/2001).
23
An interesting point: In the S&P’s announcement, it mentioned that REITs that were principally passive in nature
were not eligible for entry into an S&P’s Index. It would be interesting to test whether there are significant negative
excess returns for such REITs. We leave this issue to a later study.
24
Because it is only REITs that were explicitly mentioned in the S&P’s statement.
25
What’s more, Trizec Properties was striving to become a REIT, and became one in 2002.
7may have experienced stock price increases due to the S&P’s announcement. Furthermore, there is
the slight possibility that spillovers may have spread beyond borders and have affected other REITs
located in other countries, such as Canada.
To summarise, there is no doubt that the S&P’s announcement is rich in information content,
for it has the potential to affect a multitude of players in the market. The next section of this paper
states the null hypotheses that are to be tested and explores the previous research that has
documented the abovementioned announcement effects.
2. Shareholder wealth effects and the S&P’s Announcement
Companies added to the S&P’s indices: Literature review
There has been a multitude of authors that have studied the effects of company listings into
and de-listing from S&P’s indices. For the purposes of this paper, this section solely concentrates
on previous literature that has studied company listings.
Essentially the research questions regarding company listing can be reduced thus: If S&P’s
index inclusion is not an indicator of future performance26 – i.e. no new information is brought to
the market – then the stock price of the company listed should not significantly change in the long
term. However, numerous financial economists (Harris and Gurel, 1986; Shleifer, 1986; Jain, 1987;
Pruitt and Wei, 1989; Dhillon and Johnson, 1991; Beneish and Whalley, 1997; Lynch and
Mendenhall, 1997) have documented significant positive long-run excess returns when companies
are added into the S&P’s indices. This clearly has serious implications27 for the Efficient Market
Hypothesis (EMH). There are some authors who take the opposite view. They conclude that there
are no long-run permanent price increases. For example, Malkiel and Radasich (2001) argue that,
over a long horizon, the gains of S&P’s addition are reversed, while Cooper and Woglom (2002)
argue that, in the long-run, stock price volatility increases after the company is added to the index,
cancelling any initial price increases.
The following paragraphs seek to provide more details on the literature that have
documented these price effects.
There has been a study by S&P’s Senior Analyst Roger Bos (2000) that investigated the
effect of companies joining the S&P’s indices. Using a sample of 188 companies added to the S&P
500 from 1991, 269 companies added to the S&P MidCap 400 from 1991, and 403 companies
added to the S&P SmallCap 600 from the end of 1994, he found that from the announcement day to
the inclusion date, a stock added to: the S&P 500 would increase by 8.49%; the S&P MidCap 400
26
More information regarding the S&P’s listing criteria can be found in Bos and Ruotolo (2001).
27
Although it is not a direct violation of the EMH.
8would increase by 6.31%; and the S&P SmallCap 600 would increase by 5.40%28. He also finds
there is a partial price reversal after the inclusion date. Other authors (Beneish and Whalley, 1996;
Lynch and Mendenhall, 1997) have also corroborated this partial price reversal.
There are two main ‘camps’ in this strand of literature that seek to explain this permanent
price increase:
On one hand, there are those who argue that this phenomenon is caused by stock trading
behaviour (Harris and Gurel, 1986; Shleifer, 1986; Pruitt and Wei, 1989; Lynch and Mendenhall,
1997). This effect occurs when index funds need to purchase large amounts of shares of the new
listed company to minimise ‘tracking error’ – the difference of returns between an S&P’s Index and
a specified index tracker fund. Furthermore, other entities will buy this listed stock for their
portfolios in tandem with the index funds. Normally, index funds begin purchasing shares on the
date when the company is added into the index29. However, between the announcement date and the
inclusion date, traders and arbitrageurs actively trade on the stock in the hope of making a quick
profit as index funds start buying the stock in large quantities on the addition date. Thus, the stock
trading behaviour argument, declare its supporters, explains the immediate significant positive
excess returns between the announcement date and the addition date.
However, authors differ on whether this effect is permanent. For example, authors such as
Harris and Gurel (1986) argue that stock prices will fall back to its original level (the pure price
pressure effect), while other authors (Shleifer; 1986; Lynch and Mendenhall; 1997) argue that the
price change is permanent by appealing to the existence of a downward sloping demand curve (the
imperfect substitutes hypothesis).
On the other hand, there are authors (Jain, 1987; Dhillon and Johnson, 1991) who argue that
S&P’s inclusion does have information content contrary to the fact that the listing criteria is (i)
informationless and (ii) not a evaluation of future performance30. This explains, says its supporters,
the reason for the permanent increase in price in the long-term. For example, Dhillon and Johnson
(1991) have argued that S&P’s inclusion increases the spotlight on these companies. This reduces
their agency costs and increases future profits. This ‘information hypothesis’ argument carries
particular weight for this paper because the S&P’s announcement was greeted with fanfare and
applause, with particular attention focused on REITs now being able to appeal to the wider
investment community. However, one problem with the information hypothesis is that it does not
adequately explain the existence of the subsequent partial price reversal.
This paper performed a simple test to gain insight into Dhillon and Johnson’s (1991)
argument. In the dataset, number of shares traded at the end of each day was compiled for 49
28
These are adjusted returns which takes into account expected returns.
29
S&P’s separated the announcement date and inclusion date in order to stop this kind of stock price behaviour.
30
See Bos and Ruotolo (2001).
9individual REITs31. These individual 49 traded REIT volumes were added together on each day to
create a ‘total volume of REITs traded’ figure. It was found that from the 3rd of October, 2000 to the
3rd of October 2001, the mean and standard deviation of the total volume of REITs traded were
10,930,000 and 4,653,000, respectively. From the 4th of October, 2001 to the 3rd of October 2002,
the mean and standard deviation were 16,121,000 and 7,499,000, respectively. As one can see,
these figures seem to provide some support for the information hypothesis which purports that
S&P’s inclusion increases the spotlight on REITs. However, it also provides some support for
Cooper and Woglom’s (2002) argument, which asserts that after a stock has been added to an index,
the stock price volatility increases in the long-run, potentially offsetting any initial price increase.
To recap, there has been established research that has documented this price phenomenon
when companies are added to an S&P’s index. However, whether this price rise is permanent in the
long-run is contentious. What’s more, the exact cause for the supposedly permanent price rise is yet
to be conclusively agreed upon. Hopefully, the results of this paper are able to shed a bit of light on
this interesting debate. The next section provides an examination on the spillover effects literature.
Spillover effects: Literature review
This paper argues that the S&P’s announcement is not solely confined to those companies
that are REITs, but perhaps publicly traded real estate companies (such as REOCs) in the US, or
REITs located in non-US countries may have benefited too from the S&P’s statement.
There is a wealth of literature documenting spillover effects (or contagion effects) in the
banking sector and the international monetary markets. However, the majority of studies documents
negative spillovers that arise due to major bank collapses 32 and major international events that
create uncertainty in the international arena. For example, in the banking literature there have been
numerous studies exploring the possibility of spillover effects from a single major bank failure
spreading to other banks (e.g. the failure of Chicago Illinois Bank in 198433). Furthermore, there has
been a wealth of studies (e.g. Karolyi and Stulz, 1996) that has investigated the effects of a major
event in one country transmitting to another country.
In this body of literature, two hypotheses have emerged that seek to explain the causes of
contagion. These can be separated into: (i) panic-based contagion and (ii) information-based
contagion. Basically, panic-based contagion occurs when uninformed investors substitute
information with panic, while information-based contagion occurs when investors’ private
31
The main dataset includes 53 REITs, but because 4 REITs do not have information regarding ‘volume of shares
traded’, a total of 49 REITs was used. More information regarding this sub-dataset can be found at the end of section 3.
The names of the 49 REITS used, are those REITs listed in Appendix C minus: Chateau Communities, The Rouse
Company, Charles E. Smith and Storage USA.
32
See also Fields, Ross, Ghosh and Johnson (1994).
33
See Cooperman et al. (1992).
10information leads to contagion. It is the latter explanation that seems to be more relevant with
regards to the S&P’s announcement. This information-based contagion hypothesis assumes that
investors utilise basic variables to assess a situation. For example, in the light of a major bank
failure, proxy variables – such as, distance from a failed bank and the bank capital-ratio – are
deemed important for investors when considering whether to withdraw their savings from a
particular bank (Aharony and Swary, 1996). While Ghosh, Guttery and Sirmans (1998) studied
possible contagion effects in the REIT industry, arising from news of real estate portfolios of
financial institutions, they tested the Lang and Stulz (1992) information contagion hypothesis which
argues that ‘an announcement that reveals negative information about the real estate components of
cash flow common to all firms in the industry decreases the market’s expectations of the
profitability of the industry’s firms” (pp.598). In the light of the S&P’s announcement, it is
plausible that investors also make use of basic variables that proxy for the characteristics of REITs
and other real estate investment vehicles (e.g. REOCs) when making investment judgements. For
example, an important variable is that some REOCs contemplate whether to change their status
from a REOC to a REIT. Rational investors may take this variable into account when assessing real
estate companies in the light of the S&P’s announcement.
In short, this paper is investigating possible spillovers from the S&P’s announcement and
there is much that can be taken from the established body of literature that has dealt with contagion
effects in the banking and international finance literature. The next section examines the event-
study literature.
3. Hypotheses and Methodology
Hypotheses
As indicated earlier, the inclusion of REITs into various S&P indices for the first time is a
turning point for the real estate industry. Previous literature documents stock price movements
associated with the additions and deletions as well as potential contagion effects from important
financial events. Given this background, we formulate the following four hypotheses:
Null hypothesis 1: The announcement of those REITs (EOP, HRP, NXL, CLP, KRC and
SHU) that were to be added into their respective S&P’s index had no information content.
Null hypothesis 2: The announcement of eligibility of REIT inclusion into the S&P’s
indices had no information content for the REIT industry.
11Null hypothesis 3: The announcement of eligibility of REIT inclusion into the S&P’s
indices had no inter-industry spillover effects.
Null hypothesis 4: REIT characteristics – market capitalisation, age, REIT classification and
REIT headquarter geographical location – are not significantly associated with excess
returns.
Methodology
We subscribe to the standard event-study methodology to detect, if any, significant wealth
and spillover effects (Hypotheses 1, 2 and 3). OLS regressions of excess returns, computed from the
event-study, and REIT characteristics seek to offer evidence on the fourth hypothesis.
The event-study methodology – so prevalent in the accounting, economics and finance
literature today – began with the classic Fama, Fisher, Jensen and Roll (1969) article on the effects
of stock splits on stock prices (MacKinlay, 1997)34. Since then, the basic event-study methodology
has remained essentially unchanged, but now has incorporated new developments that account for
potential biases arising from asset pricing, non-synchronous trading, thin-trading, and cross-
dependencies35. To date, event-studies have been used, not only to test whether market efficiency
holds, but also to test whether there are wealth effects associated with an event (Binder, 1998).
We follow O’Hara and Shaw (1990) in implementing this methodology since cross-sectional
dependency in stock returns is the common element in their and our analyses. We use the OLS
market model to generate the normal returns. To begin with, this section ‘sets’ the basic parameters
of the event-study methodology used. Then, exact details of the methodology are provided along
with potential data and estimation hurdles. Finally, this section ends with a statement of the null
hypotheses to be tested.
Event study: Parameter setting
Day 0
There is no doubt that news commentators and other industry players in the real estate sector
were not surprised about this announcement. According to REIT industry participants, this was an
announcement that was long awaited36 – it was, apparently, a matter of when and who. However,
S&P’s index committee is very secretive about the contents of its announcements. So, at the very
most, it is possible that only a very small circle of people knew exactly what the S&P’s press
34
See Campbell, Lo and MacKinlay (1997) for an excellent discussion of the weaknesses and strengths of this
methodology.
35
To name a few!
36
See footnote 3. Also, “Though the announcement was made after the market close Oct. 3, investors had been
expecting a decision to be made in early October and for EOP to be included…” Wall Street Journal (07/10/2001).
12statement contained and when they planned to release it. As a result, this paper follows the
assumption that market players did not factor in the monetary consequences of the S&P’s
announcement before the announcement date.
The S&P’s statement was released at 5.15pm (ET) on the 3rd of October after the close of
trading. Following O’Hara and Shaw (1990), this paper assumes that the REIT stock prices will
begin to reflect this announcement at the beginning of the next trading day – the 4th of October.
The Event window
The scope of this paper is trained upon the immediate aftermath effects of the S&P’s
announcement. As such, an event window of 11 days (-5, +5) is set (centred on Day 0), which
should capture any abnormal returns from the pre- announcement date to the post-announcement
date37.
The Estimation window
An estimation window is selected to generate the normal returns for a particular REIT. The
exact window chosen depends on many factors, but the most important factor is to select a window
that is generally indicative of a REIT’s normal behaviour (i.e. devoid of any exogenous shocks or
confounding factors). For this study, a window was chosen to avoid: (i) the completion of merging
between Equity Office Properties and Spieker Partnerships, and (ii) any potential leakages of the
S&P’s announcement. This should avoid any ‘contamination’ as the OLS market model calculates
the normal returns.
Equity Office Properties and Spieker Partnerships completed merging proceedings on the 3rd
of July, 200138. The next day was ‘Independence Day’ – the 4th of July. As a result, the estimation
window for the OLS market model starts from the 5th of July and ends on the 26th September. This
leaves an estimation window of 60 days.
37
The post-announcement date captures the S&P index inclusion date of REITs (EOP, HRP, NXL, KRC, SHU, and
CLP) [inclusion date: 9th of October, 2001].
38
For more details, visit press release section of www.equityoffice.com
13Figure 2 : The event study time line
The OLS market model
The daily expected jth REIT’s returns, Rjt, are estimated using the OLS market model:
Rjt = αj + βjRmt + εjt (1)
where αj is the firm-specific intercept and βj is the firm-specific covariance between the jth
REIT’s returns and the market portfolio returns, Rmt, divided by the variance of market portfolio
returns. The mean of the error term, εjt, is assumed to be zero, independent of Rmt and uncorrelated
across REITs.
Cross-sectional dependency in REIT returns presents a main challenge for this paper’s use
of the event-study methodology. Due to the fact that the S&P’s announcement might have affected
all REITs in the industry at the same time, cross-dependency effects among REIT firms is almost
certain to occur. Since the OLS market model assumes that the excess returns39 are ‘independent
identically distributed’ (IID), the resultant standard errors calculated from an ‘unadjusted’ OLS
market model will be invalid, thus lowering the power to detect abnormal returns. Numerous
authors (e.g. Jain, 1982; Bernard, 1987; Chandra et al., 1990; Salinger, 1992) find that explicit
adjustment for cross-sectional bias for abnormal returns is needed to remove the bias. However,
there is a strand of authors (Brown and Warner 1985; Malatesta, 1986; Boehmer et al., 1991; p. 268)
that argue that an adjustment is only necessary in special cases and that in many cases, explicit
adjustment does more harm than good40.
Following O’Hara and Shaw (1990), this paper will adopt the widely-used Jaffe (1974)
methodology.41 The Jaffe (1974) methodology uses a test statistic that is based on the standard
deviation estimated for the portfolio of sample firms from residual returns in the estimation period.
By rearranging equation (1), the estimated excess returns for any sample REITs are:
εjt* = Rjt - αj* - βj*Rmt (2)
* *
where αj and βj are firm-specific OLS estimates calculated from days – 65 to –5 (relative
to October 4th, 2001).
The estimated excess returns for any REIT (derived in equation 2) are standardised by
dividing the excess returns at any time t by the excess returns standard deviation. This is calculated
39
Which are calculated from the OLS Market Model.
40
The ‘age-old’ compromise between the power to detect abnormal returns and β bias.
41
There is a multitude of remedial actions that have been developed and implemented to tackle cross-dependency bias.
This list was drawn from Lee and Varela (1997): i) Joint General Least Square Method based on the Seemingly
Unrelated Regressions (SUR) method (Schipper and Thomas, 1983), ii) a GLS method to estimate the mean effect due
to abnormal performance (Colin and Dent, 1984), iii) Brown and Warner’s (1985) Cross Dependencies Adjustment, iv)
Patell’s (1976) approach and v) Jaffe’s (1974) methodology.
14by using the Jaffe (1974) methodology, which estimates the variance of the residual returns from a
portfolio42 in the estimation period (equation 5). Specifically, the test statistic for any day t is:
)
et / S ( e ) (3)
N
1
et =
n ∑ εit (4)
i =1
−6
) ( et ) − ( e ) 2
S (e) = ∑ 59
(5)
−65
1 −6
e= ∑
60 −65
et (6)
OLS regressions
Once the excess returns for each REIT for each day of the event period are calculated, it is
hypothesised that these excess returns may be correlated with some basic REIT characteristics. We
study whether a small set of characteristics, such as REIT market capitalisation on the 4th of
October (MKTCAP), age of REIT (AGE) that will proxy for any ‘reputation effects’ that a REIT
may possess, REIT classification43 and the location of REIT headquarters44, may be associated with
the excess returns on October 04, 2001. In addition, dummy variables were included to account for
those REITs explicitly mentioned in the S&P’s announcement. It is hypothesised that excess returns,
ERj, are dependent upon the following linear regression:
ERj = Α0 + β1MKTCAPj + β2AGEj + δ0RTLj + δ1OFFj + δ2INDj + δ3MIXj + δ4STOj +
δ5HLTj + δ6LDGj + δ7DIVj + δ8Northeastj + δ9Midwestj + δ10Westj + δ11EOP + (7)
δ12HPT + δ13NXL + δ14KRC + δ15SHU + δ16CLP + εj
42
This paper constructed only equally-weighted portfolios. Portfolios weighted by market capitalisation were not able
to be constructed because of lack of data.
43
Specifically, REITs were broken down into these following categories: (i) Residential (RES), (ii) Retail (RTL), (iii)
Office (OFF), (iv) Industrial (IND), (v) Mixed Office and Industrial (MIX), (vi) Storage (STO), (vii) Healthcare (HTL),
(viii) Lodging (LDG) and (ix) Diversified/ Other (DIV).
44
REITs’ headquarter location segmented into those located in the Northeast, South, Midwest, and West of America.
15where ERj, MKTCAPj, and AGEj denote excess returns, market capitalisation on the 4th of October
and age (years) for REIT j, respectively. RTLj, OFFj, INDj, MIXj, STOj, HLTj, LDGj, DIVj,
Northeastj, Midwestj, Westj, EOPj, HPTj, NXLj, KRCj, SHUj, and CLPj are dummy variables with
the Residential variable and South variable set as the reference category45. α0, β1, β2, δ0, δ1, δ2, δ3, δ3,
δ4, δ5, δ6, δ7, δ8, δ9, δ10, δ11, δ12, δ13, δ14, δ15 and δ16 are OLS coefficients. It is assumed that εj follows
Gauss-Markov conditions.
4. Data and empirical results
This section begins with providing information about the dataset used in this paper.
Afterwards, results from the event-study and OLS regressions are given.
Data
REIT and REOC daily stock prices were collected from Thomas DataStream©, The Wall
Street Journal© and Yahoo© Finance. Unforeseen data errors and constraints in data availability
were obstacles we faced in sample selection and data collection.
Out of the 165 REITs that existed at that time before the announcement, only the largest 52
REITs46, ranked by their market capitalisation on the 4th of October, and 15 REOCs were chosen in
constructing our sample and the dataset47. An additional REIT, Glenborough Realty Trust, was also
included48, increasing the sample size to 53 REITs, to test for the potential candidate effects. Out of
these 53 REITs, 4 sub-datasets were carved out: (i) those REITs that were explicitly mentioned in
the announcement (sample size = 6), (ii) the top ten REITs, (ii) the top 23 REITs49, (iii) the bottom
23 REITs and (iv) potential S&P Index candidate REITs (sample size = 5). Note that sub-dataset (ii),
(iii) and (iv) exclude those REITs explicitly mentioned in the announcement [dataset (i)]. The entry
requirement for sub-dataset (iv) is that a REIT had to be added into an S&P index within a year
later of the S&P’s October 03, 2001 announcement. A total of five candidates50 met this criterion.
Lastly, a final dataset was created comprising solely of REOCs with the intention of testing
the inter-industry spillover hypothesis. Before the S&P’s announcement, a total of 33 REOCs
45
In the dataset, the most numerous REIT are of a residential kind and have their headquarters located in the South of
the USA. Therefore, we chose Residential and South as the reference category.
46
The exact 53 REITs that make up the dataset can be found in Appendix C.
47
Excluding medium and small size REITs offers the advantage of reducing estimation problems arising from thin
trading and non-synchronous trading.
48
This REIT was not large enough to enter the top 52 list and but was included to test for the potential candidate effect.
More information regarding the entry criterion can be found in footnote 49.
49
Please note that the top ten REITs nests within the top 23 REITs.
50
Six REITs, that joined one of the S&P indices within one year later of the S&P announcement on the 3rd of October
2001, were: Equity Residential, Simon Property Group, Plum Creek Timber, Liberty Property, Essex Property Trust and
Glenborough Realty Trust. Plum Creek Timber was dropped from the sample because it anticipated completing
merging with The Timber Company on the 1st of October, and then actually completed merging on the 6th October 2001.
16existed; however, due to data constraints, this paper was able to only gather data for 15 REOCs. An
exact list of the 15 REOCs used can be found in Appendix D.
Descriptive statistics: REITs
The diagram below depicts the REIT and market capitalisation distribution on the 4th of
October; as can be seen there is a varied distribution:
14000
12000
Market Capitlisation ($000,000)
10000
8000
6000
4000
2000
0
EI
EG
PJ
P
E
PT
W
IW
Z
T
L
A
P
SE
C
FR
B
BL
PC
R
U
N
EO
PS
BX
C
A
AM
S
C
H
H
D
R
R
C
C
C
M
M
REIT T icker Code
Figure 3: Distribution of the top 52 REIT market capitalisations on the 4th of October, 2001.
The total REIT market capitalisation of the top 52 REITs is roughly $104 billion –
representing roughly 35% of the total REIT market capitalisation in 2001. The mean of the top 52
REITs distribution is $2,040,000,000 and the standard deviation is roughly $1,950,000,000.
Horizontal lines on the graph above represent the mean and standard deviation. The first horizontal
line (near $ 2 billion) represents the mean REIT market capitalisation. The next line above
represents one standard deviation above that mean. The next line represents two standard deviations
above the mean and so on. As can be seen, the vast majority of the Top 52 REITs are clustered
within one standard deviation on both sides of the mean. However, EOP is more that five standard
deviations away from the mean; Equity Residential is within three standard deviations away from
the mean; and Simon Property Group is within two standard deviations away from the mean. One
could consider these REITs to be outliers51 in the distribution.
51
An interesting point: Moody’s Investors Services senior analyst and Vice President Merrie Frankel countered that
“EOP is an anomaly; large mutual fund investors are not interested in companies the size of most REITs… if they go to
17One of the five conditions that the S&P’s Index Committee uses in its decision to include a
firm into one of its index is the firm’s market capitalisation. As a general rule of thumb, firms
entering the S&P 500 Index tend to have a market capitalisation of over $4 billion; those entering
the S&P MidCap 400 Index tend to have market capitalisation of roughly between $1 billion and $5
billion; and finally, those entering the S&P Small Cap 600 Index tend have market capitalisation
ranging between $300 million to £1 billion (Bos and Ruotolo, 2001)52. Thus, the majority of the top
52 REITs, in general, can be categorised as ‘MidCap’ or ‘SmallCap’ sized companies, with few
REITs exhibiting the S&P 500 Index entry criteria.
Although it could be argued that the dataset is not totally representative53 of the total REIT
market capitalisation (roughly 35%), the possibility of exacerbating errors 54 , when introducing
overwhelmingly ‘SmallCap’ REITs that reside below the top 52 into a portfolio, can not be ignored.
As such, there appear inherent biases that seem unavoidable when using REIT data: We hope that
our paper’s data suffer from the ‘lesser evil’ (whatever that may be).
Descriptive statistics: REOCs
Before the announcement, a total of 33 REOCs existed with a combined market
capitalisation of around $30.5 billion. The mean market capitalisation was around $930 million and
the standard deviation was roughly $1.58 billion. Although this paper manages to test for only 15
REOCs, these REOCs capture roughly 80%55 of the total REOC market capitalisation. Information
regarding the exact 15 REOCs used can be found in Appendix D. The next section discusses the
‘raw’ returns that accrued to the REOC shareholders during the S&P’s announcement.
Empirical results from the event-study and OLS regressions
On October 4th, the ‘raw’ stock returns of the six REITs, which were explicitly mentioned in
the S&P’s announcement, support the hypothesis that the S&P’s announcement had positive wealth
effects. As the Table 1 shows, all REITs exhibited positive effects ranging from 0.384% to 9.422%.
However, somewhat unexpected was EOP’s stock price behaviour on the 4th of October. EOP
posted raw returns of only 0.384%.
the trouble of performing due diligence, they want to make a sizeable investment.” Commercial Property News
(01/11/2001).
52
However, there are many cases where firms are not put into a S&P index with regards to their size. For instance, there
exist some firms, with a market capitalisation of less than $ 4 billion, that are put into the S&P 500 Index.
53
i.e. introducing sampling errors.
54
Such as non-synchronous trading and thin-trading effects.
55
Data were collected from REOCs that existed at the time of the announcement and also on the 6th of June, 2005.
However, data on REOCs that existed then, but ‘died’ or ‘moved on’ later could not be collected for a number of
reasons. Since it is probable that large REOCs are more likely to ‘survive’ than smaller REOCs, this explains why our
dataset can still represent a high percentage of total REOC market capitalisation on the announcement date. However, it
also introduces issues such as ‘survivorship bias’.
18Daily Returns Daily Return Returns from Returns from
03/10/2001 04/10/2001 04/10/2001 to 04/10/2001 to
09/10/2001 02/11/2001
S&P 500 Index 2.067% -0.247% -1.522% 1.391%
S&P MidCap 400 Index 2.963% 0.459% -1.085% 3.904%
S&P SmallCap 600 Index 3.345% 0.583% -1.667% 4.275%
Morgan Stanley REIT Index -1.592% 1.251% 1.275% -0.393%
EOP -1.576% 0.384% -1.537% -9.734%
HPT -0.693% 6.367% 6.981% 21.683%
NXL -2.443% 9.422% 12.940% 7.931%
CLP -1.017% 4.553% 4.452% 1.199%
KRC -2.045% 3.967% 1.252% 0.000%
SHU -0.836% 4.553% 4.7218% 0.032%
Table 1: Raw returns (unadjusted for expected return).
An examination of REIT returns in Table 1 shows three broad patterns. Firstly, EOP’s return
dynamics differed totally from the return dynamics of all other individual REITs across all
investment horizons (one-day, three-day, one-month). Secondly, putting aside EOP returns, other
individual REIT returns departed considerably from returns on the S&P indices for one-day and
three-day investment horizons and, to some extent, from the one-month investment horizon.
Thirdly, the return patterns of the Morgan Stanley REIT Index differed from those of the S&P
indices across all investment horizons.
On the one hand, the behaviour of the individual REITs and the Morgan Stanley REIT Index
suggests convincingly that REITs were distinctly different from other sectors’ stocks. On the other
hand, EOP did not behave like other REITs. While its three-day return was about the same as that
on the S&P 500 Index, its one-month return fell more than 12% short of that on the S&P 500 Index.
It appears that the S&P’s announcement had a short-lived positive effect on EOP, but could not stop
its then-ongoing negative drift, probably reflecting the negative effects of its announcement, on
October 4th, 2001, that it was downgrading its earnings forecast for the end of 2001 and 200256.
While one-day and three-day returns on the Morgan Stanley REIT Index were consistent with the
direction of individual REIT returns, with the exception of EOP, one-month return on this index
was inconsistent with the direction of same individual REITs’ returns.
There are two problems when analysing the raw returns accruing to an event: First, there
may be other events that may explain the supposed significant wealth effects, and second, the raw
returns combine both market effects and individual firm effects (O’Hara and Shaw, 1990). By
adopting the OLS market model to generate normal returns, the second problem is solved. However,
the first problem requires detailed investigation and good judgement.
56
EOP felt that investors needed to be aware of all the facts before trading began on the 4th of October. More details can
be found on its website: www.equityoffice.com
19A thorough investigation was conducted before and after the event by looking at Wall Street
Journal articles and Internet news sources57. After completion, two events stand out. The first event
was the terrorist attacks on September the 11th. This attack was totally unexpected and resulted in
stock market uncertainty for weeks in an already fragile US economy. When trading resumed on the
17th of September, REITs that were heavily exposed in the lodging and retail sectors (and those with
real estate portfolios in NYC) were heavily ‘hit’ because of fears of a slowdown in future US
economic growth and leisure spending. Its effects were still being felt at the time of the S&P’s
announcement. Perhaps more important was the second event. On the 3rd of October (Day -1), three
investment banks58 and Raymond James Financial announced that they had lowered their ratings for
future REIT earnings59. Thus, at the start of trading, the stock market had to assimilate both the
S&P’s announcement and the REITs’ earning downgrade.
It is this second event (and to some extent the first event) that causes problems for the
interpretation of this paper’s results60. It has been documented in the contagion literature that the
stock market can ‘overreact’ in response to bad news and ‘rally’ over the next few days. An
overreaction may have occurred on the 3rd of October, precipitating possible ‘rebound’ effects from
the next day onwards. This rebound effect, coupled with the S&P’s announcement, causes
complications for the final interpretation of the event study because it is unable to distinguish
between these two effects.
In short, the few weeks leading up to the S&P’s announcement were very turbulent times for
the REIT industry. As such, an elementary interpretation of these results is to be guarded against.
The following sections deal with the results of the event study and the OLS regressions.
Excess returns and S&P’s candidate effects
Table 2 provides the excess returns for an eleven-day window centred on October 4th 2001
for a sample of six REITs explicitly mentioned in the S&P’s announcement. On average, the excess
returns on October the 4th are significantly different from zero for five out of the six firms. Only
EOP did not experience significant positive wealth effects. What is more, on average, all six REITs
experienced significant negative excess returns on the 3rd of October. The Cumulative Average
Excess Return (CARs) for EOP from the announcement date (Day 0) to the inclusion date (Day 3)
was -1.41%. For S&P MidCap 400 candidates, (HPT and NXL), CARs were 8.36% and 12.24%,
57
For example LexisNexis.
58
UBS Warburg, Morgan Stanley, and SalomonSmithBarney.
59
In essence, these four institutions relayed warnings to their clients that the REIT industry was going through uncertain
times with signs of likely earning downgrades. More details regarding the exact nature of these statements can be found
at: http://www.snlcenter.com/reit/2001/RSM_1101.pdf (pp. 32-33). (Last accessed: 6th of June 2005)
60
Moreover, one could interpret that the EOP down-earnings warning may have had spillover effects. Since EOP is the
flagship REIT, its behaviour may be taken as a proxy for the whole industry, or at the very least, the office market in
America.
20respectively. Finally, for S&P SmallCap 600 candidates, (KRC, SHU, CLP), CARs were 2.20%,
4.83% and 4.85%, respectively.
In short, five REITs experienced positive significant excess return on the 4th of October
while six REITs experienced negative excess returns on the 3rd of October. This has implications for
the interpretation for the positive wealth effects we observe: Could it be solely attributed to the
S&P’s announcement effect, or it could be a combination of the announcement and a market
‘rebound’ effect? Finally, it is interesting to note that the CARs are higher for S&P MidCap
candidates than for S&P SmallCap candidates – an observation that is consistent with that
documented by Bos (2001).
S&P 500 S&P MidCap 400 S&P SmallCap 600
EOP CAR HPT CAR NXL CAR KRC CAR SHU CAR CLP CAR
-5 0.0084 -0.0046 -0.0347 -0.0121 0.0086 0.0002
(1.01) (-0.24) (-3.26)* (-1.06) (1.08) (0.02)
-4 0.0153 -0.0182 -0.0159 -0.0027 0.0073 0.0062
(1.85)γ (-0.96) (-1.49) (-0.24) (0.92) (0.73)
-3 0.0059 0.0192 0.0033 -0.0091 -0.0051 -0.0080
(0.71) (1.02) (0.31) (-0.80) (-0.64) (-0.95)
-2 -0.0195 -0.0131 -0.0086 -0.0158 -0.0063 0.0025
(-2.36)* (-0.70) (-0.81) (-1.39) (-0.80) (0.30)
-1 -0.0237 -0.0312 -0.0374 -0.0314 -0.0138 -0.0176
(-2.87)* (-1.65)γ (-3.52)* (-2.76)* (-1.74)γ (-2.10)γ
0 0.0036 0.0036 0.0656 0.0656 0.0923 0.0923 0.0411 0.0411 0.0455 0.0455 0.0365 0.0365
(0.43) (3.48)* (8.68)* (3.61)* (5.72)* (4.34)*
1 -0.0323 -0.0287 -0.0085 0.0572 -0.0219 0.0704 0.0064 0.0475 -0.0020 0.0435 -0.0101 0.0264
(-3.91)* (-0.45) (-2.06)γ (0.57) (-0.25) (-1.20)
2 0.0217 -0.0070 0.0125 0.0697 -0.0030 0.0674 -0.0166 0.0309 -0.0012 0.0423 0.0229 0.0493
(2.63)* (0.66) (-0.28) (-1.46) (-0.16) (2.73)*
3 -0.0072 -0.0141 0.0138 0.0836 0.0550 0.1224 -0.0089 0.0220 0.0060 0.0483 -0.0008 0.0485
(-0.87) (0.73) (5.17)* (-0.78) (0.75) (-0.10)
4 -0.0171 -0.0174 -0.0154 -0.0023 -0.0014 0.0190
(-2.07)γ (-0.92) (-1.45) (-0.20) (-0.17) (2.26)γ
5 -0.0006 -0.0185 -0.0035 -0.0117 -0.0023 -0.0100
(-0.07) (-0.98) (-0.33) (-1.03) (-0.29) (-1.19)
γ
significant at the 5% level.
* significant at the 2.5% level.
t-statistics given in parentheses.
Note: no t-statistics for CARs.
Table 2: Excess returns and S&P’s candidate effects.
Excess returns and the REIT industry, Potential S&P’s candidate and Spillover effects
In Table 3, for the top 46 REITs, top 10 REITs, and top 23 REITs, we see that on average,
there are significant positive residual returns. Interestingly, for the bottom 23 REITs, significant
positive excess returns were not found61. This leads to the conclusion that positive wealth effects
61
52 REITs minus six REITs that were explicitly mentioned in the announcement.
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