Real Estate Risk Exposure of Equity Real Estate Investment Trusts Ming-Long Lee*

1 Gloscock, Lu, and So, (2000) show that equity REITs behave more like stocks after 1992. However Clayton and Mackinnon (2003) provide evidence demonstrating that equity REITs become more akin to real estate and less like stocks. Facing the seemingly contradicting evidence produced by the two studies, we extend Hsieh and Peterson (2000) and He (2002) to examine the real estate risk exposure of equity REITs. Contrary to Clayton and Mackinnon’s (2003) study, our results do not support that equity REITs are more like real estate after 1992. Our results appear to consistent with Graff and Young (1997) who conclude that the increased institutional interest has caused REIT return behavior to diverge from the returns on underlying REIT property portfolios