Faculty Publications

The Pricing Of Real Estate Investment Trust Initial Public Offerings

Document Type

Article

Keywords

Initial Public Offerings (IPOs), Real Estate Investment Trusts (REITs)

Journal/Book/Conference Title

The Journal of Real Estate Finance and Economics

Volume

11

Issue

1

First Page

55

Last Page

64

Abstract

This paper examines the pricing of Initial Public Offerings (IPOs) of Real Estate Investment Trusts (REITs). Unlike standard corporations, evidence suggests that REIT IPOs are correctly priced in the initial market. Significant negative initial-day return for mortgage REITs is found to be a function of using the bid price to calculate returns for those securities, which trade initially over the counter (OTC). If the bid-ask average or the ask price is used in calculating returns, any apparent overpricing disappears. Additionally, we find that once transactions costs are considered, an investor is better off purchasing a REIT on the offering. © 1995 Kluwer Academic Publishers.

Department

Department of Finance

Original Publication Date

7-1-1995

DOI of published version

10.1007/BF01097936

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