What Drives REIT Prices? The Time-Varying Informational Content of Dividend Yields

Abstract

In this study, I investigate the informational content in the dividend yields of equity real estate investment trusts (REITs). The findings show that during the vintage REIT era, 1980–1992, expected aggregate REIT dividend growth is forecastable from aggregate REIT dividend yields at both short and long horizons. This empirical predictive relation is negative, which is consistent with the usual prediction of the dividend pricing model. In contrast, over the new REIT era, 1993–2011, there is a positive predictive relation from dividend yields to aggregate REIT returns. Meanwhile, REIT dividend yield cedes its role in predicting aggregate REIT dividend growth.