Abstract
Executive Summary. Using a sample of 58 Equity RealEstate Investment Trusts (EREITs) with geographic areaspecialization from 1994 to 2006, this study examines ifEREITs concentrating their investment geographicallycould be able to generate abnormal returns due to homeexpertise. Based on the risk adjustment by Carhart's(1997) four-factor model, only REITs with geographicalconcentration in the Mideast and Northeast generate abnormalreturns during the sample time period. However,with the robustness check, the abnormal return disappears.This paper therefore cautions the biased findingsdue to model misspecification problem and suggests thatthe REIT sector is generally functioning in an efficientfashion.
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