Reits’ Price Reaction to Unexpected FFO Announcements

Reits’ Price Reaction to Unexpected FFO Announcements This study examines the reaction of REIT prices to unexpected FFO announcements. Using both the traditionally constrained models and an unconstrained model, we find that the market reacts significantly when REITs announce unexpected FFO with a stronger response for positive than negative surprises. Also, we find that FFO explains significantly more variance in abnormal returns than net income supporting our conjecture that FFO, being more accurately reflective of cash flow, provides more useful information to investors than traditional GAAP measures. Our results are robust to different specifications. The results also suggest that the traditional approaches have been misspecified. The Journal of Real Estate Finance and Economics Springer Journals

Reits’ Price Reaction to Unexpected FFO Announcements

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Springer US
Copyright © 2010 by Springer Science+Business Media, LLC
Economics; Regional/Spatial Science; Financial Services
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