REITs, growth options and beta

Dogan Tirtiroglu, Thu Ha Nguyen, Ercan Tirtiroglu, Tan Cheng Wee

Research output: Contribution to journalArticleResearchpeer-review

4 Citations (Scopus)


Are REITs income stocks, only? Following Myers (1977) and Bernardo et al. (2007), we examine empirically REITs’ unlevered betas, betas of growth options, betas of assets-in-place and the difference between the latter two in detail for 1983–2012, and also for three sequential, distinct, and mutually-exclusive REIT sub-periods. We find that, (i) the betas of growth options are larger than those of assets-in-place, (ii) there are differences in these betas across Equity REITs’ sub-sectors and sub-periods, (iii) REITs with a high growth profile tend to employ more short-term debt and are mainly listed on NASDAQ, and (iv) the Global Financial Crisis has influenced considerably the beta estimates across all sub-sectors and REIT types. These findings raise a question mark about the ‘income stock, only’ description of REITs. Our findings have important implications for the cost of capital of REITs and their capital budgeting practices. We discuss them, when appropriate, with numerical examples.

Original languageEnglish
Pages (from-to)370-394
Number of pages25
JournalJournal of Real Estate Finance and Economics
Issue number3
Publication statusPublished - Oct 2017


  • Assets-in-place
  • Beta
  • Cost of capital
  • Growth option
  • REIT Maturity Era
  • REITs

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