Aggregate investment, economic dynamics, and predictability in the U.S. REIT market

Liang, Weijian, Eshraghi, Arman ORCID: https://orcid.org/0000-0002-7406-1725 and Wang, Qingwei ORCID: https://orcid.org/0000-0002-3695-7846 2025. Aggregate investment, economic dynamics, and predictability in the U.S. REIT market. Journal of Real Estate Finance and Economics Item availability restricted.

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Abstract

Grounded in the investment CAPM, this paper investigates whether aggregate investment predicts future market returns in the U.S. equity REIT sector. We find a one-standard-deviation increase in aggregate investment, measured as value-weighted annual operating asset growth, signals an approximate 5.6% lower expected annual excess REIT market return from 1972–2023. This predictability is robust to extensive controls, including valuation ratios, interest rates, other corporate policies, and investor sentiment, and holds across various robustness checks. Interpretation analyses strongly support a primary role for time-varying risk premia, showing aggregate investment covaries negatively with economic uncertainty and predicts future economic growth dynamics in a hump-shaped pattern. While sentiment effects are present, they appear secondary, and the predictability is mainly driven by debt-financed investment. Evidence does not support an equity dilution explanation. Our findings validate the investment-CAPM framework for REITs and identify aggregate investment as a robust predictor of REIT market dynamics

Item Type:	Article
Status:	In Press
Schools:	Schools > Business (Including Economics)
Publisher:	Springer Verlag (Germany)
ISSN:	0895-5638
Date of First Compliant Deposit:	18 August 2025
Date of Acceptance:	15 August 2025
Last Modified:	18 Aug 2025 15:15
URI:	https://orca.cardiff.ac.uk/id/eprint/180462

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