Abstract
This article investigates the equity cross-section of real estate investment trusts (REITs) both when REITs are added as a separate portfolio to the cross-section of industries and when individual REITs are studied in isolation. A nine-factor asset pricing model which critically relies on the bankruptcy risk factor of Neumann (2021b) produces REIT portfolios which outperform the REIT market in terms of Sharpe ratio and the S&P 500 index in terms of absolute returns. The decrease in adjusted R<sup>2</sup> of an asset pricing model when REITs are included as a separate portfolio is presented as an alternative quantification of the temporally dynamic correlation between REITs and other equity assets.
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