Movatterモバイル変換

[0]ホーム
URL:

Advanced search

Browse Econ Literature

More features

IDEAS home Printed from https://ideas.repec.org/p/uct/uconnp/2020-11.html
    My bibliography Save this paper

The Bennet Decomposition and Predictability of the U.S. REITs’ Profitability

Author

Listed:
  • Zhilan Feng

    (Clarkson University)

  • Stephen M. Miller

    (University of Nevada, Las Vegas)

  • Dogan Tirtiroglu

    (Ryerson University)

Abstract

This paper examines empirically the predictability of operating profitability and whether any observed predictability stems from the asset or debt management policies of a portfolio of REITs. Return on assets (ROA), return on equity (ROE), Change in ROA and Change in ROE are the profitability measures of the sample portfolio, which covers, on average, about 84% of U.S. REITs included in the FTSE NAREIT All Equity Index between 1989 and 2015. While the asset management policies of sample REITs engenders ROA and Change in ROA, their asset and debt management policies jointly engender the ROE and Change in ROE. Our empirical work focuses on the coefficient estimates of (i) the own lags of each of these four profitability measures, and (ii) the lags of the “between,” “within,” “entry,” and “exit” effects, obtained from the first-ever application of the Bennet (1920) dynamic decomposition to the temporal changes - between (t) and (t-1) - in the ROA and ROE of the sample portfolio. A comparison of the estimates -- between the ROA and ROE as well as between the Change in ROA and Change in ROE estimations -- in (i) and (ii) provides evidence about the root of the predictability. Our work repeats all the estimations above under the funds from operations (FFO) and net income (NI) metrics, which are used in computing the ROA and ROE measures and also their temporal changes. A comparison of the FFO- and NI-based results at the portfolio level is important since there is a growing literature and debate on whether the information content of FFO differs incrementally from that of NI. We find that (i) the predictability of profitability of the sample portfolio of REITs is highly visible and statistically strong; (ii) the estimates of the first own lags of the dependent variables or the first and second lags of some of the Bennet (1920) dynamic decomposition effects - especially the “within” effect - provide strong evidence of predictability; and (iii) the use of FFO unearths evidence that the sample REITs’ asset management policies, as embodied in ROA and Change in ROA, have more to do with predictability than a combination of their asset and debt management policies, as embodied in ROE and Change in ROE, does. These findings should be useful to the investors and REIT managers and the REIT literature.

Suggested Citation

  • Zhilan Feng & Stephen M. Miller & Dogan Tirtiroglu, 2020. "The Bennet Decomposition and Predictability of the U.S. REITs’ Profitability,"Working papers 2020-11, University of Connecticut, Department of Economics.
    • Handle:RePEc:uct:uconnp:2020-11
    Note: Dogan Tirtiroglu is the corresponding author
    as

    Download full text from publisher

    File URL:https://media.economics.uconn.edu/working/2020-11.pdf
    File Function: Full text
    Download Restriction: no

    References listed on IDEAS

    as
    1. Anderson, Randy I. & Fok, Robert & Springer, Thomas & Webb, James, 2002."Technical efficiency and economies of scale: A non-parametric analysis of REIT operating efficiency,"European Journal of Operational Research, Elsevier, vol. 139(3), pages 598-612, June.
    2. Bhattacharya, Nilabhra & Black, Ervin L. & Christensen, Theodore E. & Larson, Chad R., 2003."Assessing the relative informativeness and permanence of pro forma earnings and GAAP operating earnings,"Journal of Accounting and Economics, Elsevier, vol. 36(1-3), pages 285-319, December.
    3. John Haltiwanger, 1997."Measuring and analyzing aggregate fluctuations: the importance of building from microeconomic evidence,"Review, Federal Reserve Bank of St. Louis, issue May, pages 55-78.
    4. Nusret Cakici & Isil Erol & Dogan Tirtiroglu, 2014."Tracking the Evolution of Idiosyncratic Risk and Cross-Sectional Expected Returns for US REITs,"The Journal of Real Estate Finance and Economics, Springer, vol. 48(3), pages 415-440, April.
    5. Danny Ben-Shahar & Eyal Sulganik & Desmond Tsang, 2011."Funds from Operations Versus Net Income: Examining the Dividend-Relevance of REIT Performance Measures,"Journal of Real Estate Research, American Real Estate Society, vol. 33(3), pages 415-442.
    6. Yongil Jeon & Stephen M. Miller, 2002. "An 'Ideal' Deconposition of Industry Dynamics: An Application to the Nationwide and State Level U.S. Banking Industry,"Working papers 2002-23, University of Connecticut, Department of Economics.
    7. W. Erwin Diewert, 2005."Index Number Theory Using Differences Rather Than Ratios,"American Journal of Economics and Sociology, Wiley Blackwell, vol. 64(1), pages 311-360, January.
    8. Griliches, Zvi & Regev, Haim, 1995."Firm productivity in Israeli industry 1979-1988,"Journal of Econometrics, Elsevier, vol. 65(1), pages 175-203, January.
    9. McGuckin, Robert H, 1995."Establishment Microdata for Economic Research and Policy Analysis: Looking beyond the Aggregates,"Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 121-126, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zhilan Feng & Stephen M. Miller & Dogan Tirtiroglu, 2025."Does Debt Management Matter for REIT Returns?,"The Journal of Real Estate Finance and Economics, Springer, vol. 70(1), pages 1-37, January.
    2. Bert Balk, 2003."The Residual: On Monitoring and Benchmarking Firms, Industries, and Economies with Respect to Productivity,"Journal of Productivity Analysis, Springer, vol. 20(1), pages 5-47, July.
    3. Zhilan Feng & Zhilu Lin & Wentao Wu, 2022."CEO Influence on Funds from Operations (FFO) Adjustment for Real Estate Investment Trusts (REITs),"The Journal of Real Estate Finance and Economics, Springer, vol. 65(3), pages 524-547, October.
    4. Hyytinen, Ari & Maliranta, Mika, 2011. "Firm Lifecycles and External Restructuring,"Discussion Papers 1253, The Research Institute of the Finnish Economy.
    5. Yongil Jeon & Stephen M. Miller, 2002. "Foreign and Domestic Bank Performances: An Ideal Decomposition of Industry Dynamics,"Working papers 2002-24, University of Connecticut, Department of Economics.
    6. Viktoria Kocsis & Victoria Shestalova & Henry van der Wiel & Nick Zubanov & Ruslan Lukach & Bert Minne, 2009. "Relation entry, exit and productivity: an overview of recent theoretical and empirical literature,"CPB Document 180.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    7. Baldwin, John R., 1999. "A Portrait of Entrants and Exits,"Analytical Studies Branch Research Paper Series 1999121e, Statistics Canada, Analytical Studies Branch.
    8. Viktoria Kocsis & Victoria Shestalova & Henry van der Wiel & Nick Zubanov & Ruslan Lukach & Bert Minne, 2009. "Relation entry, exit and productivity: an overview of recent theoretical and empirical literature,"CPB Document 180, CPB Netherlands Bureau for Economic Policy Analysis.
    9. J.W.B. Bos & P.C. van Santen & P. Schilp, 2009. "Reallocating Profits in Restructuring Industries: Evidence from European and US Banking,"Working Papers 09-12, Utrecht School of Economics.
    10. J. David Brown & John S. Earle, 2008. "Understanding the Contributions of Reallocation to Productivity Growth: Lessons from a Comparative Firm-Level Analysis,"ESCIRRU Working Papers 9, DIW Berlin, German Institute for Economic Research.
    11. Aw, Bee Yan & Chen, Xiaomin & Roberts, Mark J., 2001."Firm-level evidence on productivity differentials and turnover in Taiwanese manufacturing,"Journal of Development Economics, Elsevier, vol. 66(1), pages 51-86, October.
    12. de Backer, Koen & Sleuwaegen, Leo, 2003."Foreign ownership and productivity dynamics,"Economics Letters, Elsevier, vol. 79(2), pages 177-183, May.
    13. Nishimura, Kiyohiko G. & Nakajima, Takanobu & Kiyota, Kozo, 2005."Does the natural selection mechanism still work in severe recessions?: Examination of the Japanese economy in the 1990s,"Journal of Economic Behavior & Organization, Elsevier, vol. 58(1), pages 53-78, September.
    14. Lucia Foster & John C. Haltiwanger & C. J. Krizan, 2001."Aggregate Productivity Growth: Lessons from Microeconomic Evidence,"NBER Chapters, in:New Developments in Productivity Analysis, pages 303-372,National Bureau of Economic Research, Inc.
    15. Hyytinen, Ari & Maliranta, Mika, 2013."Firm lifecycles and evolution of industry productivity,"Research Policy, Elsevier, vol. 42(5), pages 1080-1098.
    16. Suzanne Kok & Nicole Bosch & Anja Deelen & Rob Euwals, 2011. "Migrant Women on the Labour Market,"CPB Discussion Paper 180.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    17. repec:pru:wpaper:36 is not listed on IDEAS
    18. Aradhna Aggarwal & Takahiro Sato, 2015. "Identifying High Growth Firms in India: An Alternative Approach,"Discussion Paper Series DP2015-14, Research Institute for Economics & Business Administration, Kobe University.
    19. Roberto Fontana & Lionel Nesta, 2009."Product Innovation and Survival in a High-Tech Industry,"Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 34(4), pages 287-306, June.
    20. Erol Taymaz & Ebru Voyvoda & Kamil Yilmaz, 2010. "Global Links and Local Bonds: The Role of Ownership and Size in Productivity Growth,"Koç University-TUSIAD Economic Research Forum Working Papers 1020, Koc University-TUSIAD Economic Research Forum.
    21. Yongil Jeon & Stephen M. Miller, 2002. "An 'Ideal' Deconposition of Industry Dynamics: An Application to the Nationwide and State Level U.S. Banking Industry,"Working papers 2002-23, University of Connecticut, Department of Economics.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • G2 - Financial Economics - - Financial Institutions and Services

    NEP fields

    This paper has been announced in the followingNEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle:RePEc:uct:uconnp:2020-11. Seegeneral information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do ithere. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    IfCitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help withthis form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in yourRePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mark McConnel (email available below). General contact details of provider:https://edirc.repec.org/data/deuctus.html.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is aRePEc service. RePEc uses bibliographic data supplied by the respective publishers.
    [8]ページ先頭
    ©2009-2026 Movatter.jp