Momentum Profitability and Market Trend: Evidence from REITs |
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Authors: | Szu-Yin Kathy Hung John L. Glascock |
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Affiliation: | (1) Department of Accounting and Finance, California State University, East Bay, 25800 Carlos Bee Blvd, Hayward, CA 94542, USA;(2) Department of Land Economy, Cambridge University, 19 Silver Street, Cambridge, CB3 9EP, UK |
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Abstract: | This study investigates Real Estate Investment Trusts’ momentum returns in different market states, and explains the momentum phenomenon with a risk-based dividend growth theory of Johnson (Journal of Finance 57:585–608, 2002). Our results show that momentum returns of REITs are higher during up markets. This study finds that winners’ dividend/price ratios are higher than those of losers, and momentum returns are positively correlated with the difference between winners’ and losers’ dividend/price ratios. We also find that momentum returns are higher after the legislation change of REITs in 1992, and that dividend/price ratios of REITs are also higher after 1992, suggesting that a persistent shock to REIT’s dividend/price ratios in 1992 partly explains REITs’ higher momentum returns after 1992. In sum, results of this study suggest that momentum returns of REITs can be jointly explained by a time-varying factor (market state) and a cross-sectional variance in dividend yields. |
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Keywords: | Real Estate Investment Trusts (REIT) Momentum predictability Market states Dividend-growth-rate model |
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