Political Cycles, Partisan Orientation, Gridlock, and REIT Returns

Abstract

Executive Summary. This study examines several aspectsof the relationship between the presidential electioncycle in the United States, political party in power,government gridlock, and real estate investment trust(REIT) excess returns. The study covers the period February1972 through January 2007. The results indicatethat REITs are significantly influenced by the politicalenvironment, and the nature of the association is morecomplex than often perceived. REITs provide higher excessreturns: (a) under the joint condition that the Fedpursues an expansionary monetary policy and the RepublicanParty controls the White House, (b) during thelast two years of the president's term, especially duringRepublican administrations, and (c) when there is politicalunity in the executive and legislative branches of thegovernment.