The impact of subprime crisis on U.S. real estate investment trust

Abstract

The purpose of this study is to analyze how the Subprime crisis affected on U.S. real estate investment trusts (REITS). This is achieved by testing the relationship between REITs and utility stocks using data from the United States. REITs and utility stocks have been viewed to belong to same asset class unit, because utility stocks and REITs can bring people high incomes by dividends with low risks. But when Subprime Crisis occurred, investors began to look at the risk characteristics of REITs. Our results show that a major macroeconomic crisis can have additional effects on the relationship between financial assets that have been thought to be quite similar. And our results remind us the fact that the correlation matrices of returns on different financial assets regularly used in financial optimizations are not necessarily stable over time.