Public Information, REIT Responses, Size, Leverage, and Focus

Public Information, REIT Responses, Size,
Leverage, and Focus
Authors A r j u n C h a t r a t h , R o h a n A . C h r i s t i e - D av i d ,
and Sanjay Ramchander
Abstract We evaluate real estate investment trust (REIT) responses to the

release of REIT-specific and macroeconomic news over two
periods with differing economic climates. More specifically,
using high-frequency data, we track the response function over
a period of 60 minutes following each announcement. Tests show
REIT-specific information to have larger, and in many instances
opposite, effects to that of macroeconomic news. REITs also
tend to be more sensitive to public information when the
economy experiences a downturn. REIT size, leverage, and focus
also play an important mediating role between REIT trading
activity and public information.
We analyze the contemporaneous processing of information in real estate

investment (REITs), and how the state of the economy, REIT size, leverage, and
focus mediate this process. To do this, two important elements of public
informationmacroeconomic and REIT-specificare investigated.1 Based on
related evidence from equity markets, there are good reasons to consider both
sources of information. For instance, the literature documents evidence that stock
markets react to macroeconomic news. Chen, Roll, and Ross (1986) note that
industrial production, measures of unanticipated inflation, and changes in expected
inflation are all priced factors in explaining stock returns. In a similar vein,
McQueen and Roley (1993) suggest that these responses vary with the state of
the economy. These findings extend to other markets. Ederington and Lee (1993)
find evidence in Treasury futures markets of higher volatility shortly after the
market opens, corresponding to the release of economic news. Foreign exchange
markets also show strong responses to economic information (e.g., Almeida,
Goodhart, and Payne, 1998). These are but a few of the studies that successfully
document the effects of economic information on asset prices. On the other hand,
the evidence with firm-specific news is mixed. Roll (1988) has difficulty finding
the effects of firm-specific news on a sample of 96 large stocks and notes that the
explanatory power of the return regressions actually improves when firm-specific
news dates are removed. Similar evidence, or the lack thereof, is documented by
others (e.g., Cutler, Poterba, and Summers, 1989). On the other hand, Barry and
J R E R Vo l . 3 4 N o . 4 2 0 1 2
4 6 4 C h a t r a t h , C h r i s t i e - D a v i d , a n d R a m c h a n d e r
Howe (1994), employing intraday data in half-hourly intervals, find that news
stories, reported by leading news outlets, have a positive, albeit moderate, effect
on stock trading volume. However, they also find the effects on price volatility to
be less clear [see also Mitchell and Mulherin (1994)]. More recently, Christie-
David, Lee, and Moore (2010) and Engle, Hansen, and Lund (2011), employing
high-frequency trades databases, find that firm-specific information explains a
significant proportion of stock market activity. Their results suggest that news
observed by a broad set of market participants is likely to be incorporated rapidly.
Lines of Inquiry
We distinguish our study from prior work in at least three ways. First, we examine
contemporaneous REIT responses to public information. To the best of our
knowledge, we have yet to find a rigorous attempt to relate intraday information
effects with REIT securities.2 This, we argue, is a notable omission since
information effects in the general equity market need not necessarily apply to
REITs. For instance, there is consensus that REITs present risk/return
characteristics that are different from the general stock market (e.g., Glascock,
Michayluk, and Neuhauser, 2004). Low and declining correlations between REIT
and stock market returns have also been noted.3 Additionally, there is the
suggestion that relatively mature REITs now more closely reflect the performance
of unsecuritized real estate markets (Ghosh, Miles, and Sirmans, 1996; Chatrath,
Liang, and McIntosh, 1999; Lin and Yung, 2006; among others). Along these
lines, Chiang (2010) finds that comovements of equity REITs within the same
property type has strengthened during the new REIT era (19922004) vis-a`-vis
the vintage era (19801991). Furthermore, there is evidence that REIT securities
may process information somewhat differently from their equity counterparts.
Kallberg, Liu, and Trzcinka (2000) examine REIT mutual funds and infer that
informed trading is more likely to be found in the real estate market than in the
general stock market. Their arguments are consistent with Damodaran and Liu
(1993), who indicate that insiders may engage in opportunistic behavior in these
markets because of their access to appraisal information prior to its public release.
Second, the effects of a changing economic environment on contemporaneous
REIT responses to information are examined. Our sample covers January 1, 2002
through December 31, 2003 (first period) and January 1, 2007 through December
31, 2008 (second period). The first period witnessed a continuation in the upward
trend in the value of real estate in the United States, which began in the early
1990s. Importantly, the effects of the September 2001 terrorist attack on New
York City are thought to have been fully assimilated by the real estate market by
late 2001 (e.g., Liu, Kallberg and Pasquariello, 2008). On the other hand, in the
second period the REIT industry experienced a considerable downfall. By
contrasting these two periods, we provide an understanding about the sensitivity
of REITs to information in differing real estate cycles. Prior studies in other
markets suggest that these responses may vary with the state of the economy (e.g.,
P u b l i c I n f o r m a t i o n , R E I T R e s p o n s e s 4 6 5
McQueen and Roley, 1993). Therefore, based on this evidence, we seek answers
to the following initial lines of inquiry: (1) How timely are REIT responses to
public information?; and (2) Does the state of the economy play a role in these
responses?
Third, we frame our analysis along three important dimensions: size, leverage,
and focus. Capozza and Israelsen (2007) find these three factors to be important
in explaining the return predictability of REITs. This allows us to assess the
importance of each of these factors in contemporaneous responses of REITs.
We suggest that greater price discovery and larger increases in trading activity
will be associated with larger REITs following the release of REIT-specific
information, vis-a`-vis their smaller counterparts. This suggestion is underpinned
by the fact that larger REITs present less uncertainty about their valuation since
they have higher levels of institutional ownership and are more closely covered
by analysts (e.g., Below, Kiely, and McIntosh, 1995; Wang, Erickson, Gau, and
Chan, 2003). Thus, they are likely to be more liquid and transparent vis-a`-vis their
smaller counterparts, thus encouraging greater price discovery. In any event, an
analysis of REIT size uncovers evidence of informationally-driven size-based
trading clienteles, wherein traders favor one size category over another.
Leverage also likely plays a role in how REITs process information. But the
weight of this factor is subject to regulatory and other institutional influences. The
requirement that REITs pay a majority of their earnings in dividends, often leads
them to turn to debt markets for financing.4 It follows then that in all likelihood,
highly levered REITs are more heavily scrutinized by financial markets than
others. This transparency and greater liquidity should lead highly levered REITs
to be more responsive to REIT-specific information, consequently leading to larger
increases in trading activity for these REITs.
Finally, we suggest that REIT focus also plays a determining role. This stems
from the notion that investments by mortgage REITs are more focused and easier
to value than those of equity REITs. Mortgage REITs mainly invest in real estate
debt. On the other hand, equity REITs primarily invest in properties, and thus,
present greater valuation difficulties as property is in some respects unique. Thus,
it is likely that mortgage REITs respond more strongly to REIT-specific
information than equity REITs. More generally, it can be argued that the more
focused REITs are, the easier they are to evaluate (e.g., Capozza and Seguin,
1999).
In summary, the underpinnings to our explanations about size, leverage, and focus
are straightforward. REITs that are actively traded, more transparent, more easy
to value, and more closely covered by analysts (because they are large or make
more frequent visits to debt markets) are likely to be more responsive to REIT-
specific public information than otherwise. These responses are evidenced by
increased trading activity (the number of trades and quotes).
Our study also utilizes macroeconomic information. While REIT-specific
information is primarily about the firm, the implications of macroeconomic
J R E R Vo l . 3 4 N o . 4 2 0 1 2
information in terms of its relevance to the company may not be as

straightforward. Interpreting this information can take time. Along these lines, we
can expect economic information, ceteris paribus, to have greater consequences
for large, highly leveraged REITs, and for those engaged in mortgage debt. Thus,
as market participants deliberate, larger contractions in trading and quoting
(relative to normal trading activity) are likely to occur with these REITs as traders
interpret this information. Keep in mind, responses to information not only include
increases in trading and quoting, but also contractions.
We present our thoughts about size, leverage, and focus in the next three lines of
inquiry.
1. Size Effects: Does REIT size matter in their responsiveness? Do larger
REITs exhibit more pronounced responses vis-a`-vis their smaller
counterparts?
2. Leverage Effects: What role does leverage play in explaining REITs
responsiveness to new information? Do highly leveraged REITs, vis-a`-vis
lower leveraged REITs, show more pronounced responses?
3. Focus Effects: Does REIT focus matter in price discovery? Do Mortgage
REITs exhibit greater responses than Equity REITs?
Sampling Method, Data, and Research Design

The sample covers January 1, 2002 through December 31, 2003 (first period or
0203) and January 1, 2007 through December 31, 2008 (second period or 0708).
We gather data for REITs listed on REITWatch. To keep the samples consistent
between the two periods, we restrict the data to REITs available in both periods.
The sampled REITs belong to the NYSE. Using these filters, along with others
(availability of data on the NYSEs Trades and Quotes (TAQ) database, the
availability of news in press releases from Newswires (Dow Jones and Reuters),
availability of data from Compustat) results in a sample of 61 REITs. The raw
data files are large, and even when whittled down into announcement (news) and
matching non-announcement (no-news) periods, the files still remain large
(3,360,509 trades and 5,141,776 quotes).
Tr a d e s a n d Q u o t e s D a t a
Intraday trade and quote data are gathered for transaction prices and trade sizes,
trade times, bid prices and sizes, ask prices and sizes, and quote times. For each
REIT we construct several variables for each year, month, day, hour, minute, and
second, from the open of trading at 9:30 a.m. to the close of trading at 4:00 p.m.
The variables are defined as follows:
Trade Size Transaction size (actual number of shares traded);
Tradesm Number of trades per minute;
Rs ln(Ps /Ps 1), where Ps is the transaction price at day d, hour h,

minute m, and second s, and Ps1 is the first transaction price
preceding that trade;
BAS Proportional bid-ask spread (Ask Bid/Ask Bid/2), henceforth
termed the spread;
BSZ Bid size, or number of shares that are bid;
OSZ Offer size, or number of shares that are on offer;
Depth Sum of bid and offer size (total number of shares bid and offered);
and
Quotesm Number of quotes per minute.
A regular trading day comprises 390 minutesfrom 9:30 a.m. to 4:00 p.m.
Trading activity that occurs in the first minute of trading is identified as a 9:30
a.m. event. If multiple trades occur within a given minute, the average transaction
size and the average return for that minute are employed. Similarly, if multiple
quotes occur in a given minute, the average bid-ask spread and the average depth
are used. The process of averaging should not materially impact our results, since
news stories can at best, be determined only to the nearest minute.
The TAQ data are filtered for several other sources of error. We delete transactions
if (a) trade price or trade size is 0; (b) if bid-ask spread is greater than $10;
(c) bid-ask spread is negative; or (d) either the bid or ask price is negative.5
As we noted earlier, REITs listed with the NYSE are employed. However, trading
can take place on other exchanges, but we discard these trades and quotes.6 We
also examine the concentration of preopen trades to see if this is a concern.
Such trades increased in the late 1990s with the establishment of electronic
communication networks (ECNs), particularly for large stocks. When our sample
is screened for these trades, this is found to be less of an issue.
R E I T- S p e c i f i c a n d M a c r o e c o n o m i c N e w s
REIT-specific news is obtained from the Dow Jones and Reuters Newswires.7 The
search is based on headlines news, the assumption being that news of any
importance will be headlined. The search gives the number of news items (hits).
Each hit, in addition to the headline, gives the reporting agency, the date and time
of the report, and the number of words in that report. Beneath the headline a brief
(usually two to three lines) of text follow. It is possible that some REITs, being
smaller than other firms may receive limited coverage. With that said, two of the
most prominent news sources, the Dow Jones and Reuters wires, both known for
their detailed coverage of all issues financial, are used. However, in a bid to further
minimize any lack of coverage, we take an additional step, by including a third
source, REIT-specific data from Briefing.com. This source provides earnings and
other firm-specific information such as debt upgrades/downgrades, and augments
the other two sources. Since all three sources track the same events, there is
extensive duplication between them. In many ways this duplication (by providing
J R E R Vo l . 3 4 N o . 4 2 0 1 2
cross-confirmation) adds a high degree of robustness to the information, and we

view this in a positive light. We read through 7,604 news stories. After discarding
duplicates, and backward-looking information, the retention rate is around 54%
(4,051 news stories).
Market-wide economic news is obtained from Briefing.com (this is in addition to
the REIT stories (noted earlier) that we sample from this source). The economic
announcements we employ have been shown to be important to financial markets
(e.g., Ederington and Lee, 1993; among others).8 A total of 816 macroeconomic
releases are obtained for the two sample periods.9 For this study, the date and
time of each macroeconomic release is of interest. Note that each macroeconomic
announcement potentially affects every company. In other words, the total
announcements that are macroeconomic is 816*61. Thus, a finding of larger firm-
specific effects vis-a`-vis macroeconomic will be strong evidence that REITs
respond to firm-specific events in relatively more pronounced ways than to
economic information.
Research Design
Public information arrives in the market throughout the day. Binary (dummy)
variables are constructed for all news items. The news effects are allowed to
potentially affect the next 60 minutes (four quarter-hours) of trading activity.10
Based on the evidence in related markets, the window of four quarter-hours,
although arbitrary, is reasonable. Data from the remaining time periods (the no-
news period) are used to construct a matched control sample for each firm.
Information Released Before Trading, After Trading, On Weekends, and Holidays.
Information released before trading (from 12:00 a.m. to 9:29 a.m.) is allowed to
potentially affect market activity at the open. Binary variables are again employed.
For instance, to capture the first quarter-hour effects, binary variables are set up
from 9:30 a.m. to 9:44 a.m., and for the second quarter-hour effects, from 9:45
a.m. to 9:59 a.m., and so on. For example, on October 24, 2002, prior to the
market open, Reuters News carries the headline Glimcher Realty 3rd-quarter net
rises. The effects of this pre-opening news release are captured in the first quarter-
hour by market activity from 9:30 a.m. to 9:44 a.m. and in the second quarter-
hour by market activity from 9:45 a.m. to 9:59 a.m., and so on.
Information released after trading hours (4:00 p.m. to 11:59 p.m.) is captured by
market activity on the next trading day. For example, on October 30, 2007, after
market closing, the Dow Jones News Service carries the headline Highwood
Ppties 3Q EPS 17c vs. EPS 9c. For this release, the first-quarter-hour effects are
captured by 9:30 a.m. to 9:44 a.m. market activity on the next trading day, and
so on. Information released on weekends or regular holidays is similarly captured
by market activity on the first trading day following the weekend or the holiday.11
The Last Thirty Minutes of Trading. Information released in the last 30 minutes
of trading is accommodated for possible overnight trading effects. These news
releases are allowed to potentially affect the next business days trading. The
9:30 a.m. to 9:44 a.m. variables on the next business day capture first quarter-
hour effects, and so on. There are a limited number of announcements treated this
way (83 of the 7,604 examined).
Control Samples. In order to make robust statistical inferences about the impact
of news, we employ a control sample that is (a) not contaminated by news and
(b) addresses intraday and day-of-the week seasonal patterns documented in
financial markets (e.g., Wood, McInish, Ord, 1985; among others).
Since the announcement sample is composed exclusively of hours following the
news releases for each REIT, we match this with a control sample by draws from
the no-news sample for each firm. Matching is strictly by REIT (news) with its
own no-news sample. The nearest no-news day-of-the-week is matched with the
news day at precisely the same time (hour and minute). The procedure, although
time-consuming, yields a clean control sample for both macroeconomic and firm-
specific news.12 Importantly, since matching is strictly on a REIT-with-REIT basis,
there is no need to introduce any firm-specific controls. Once matching for each
REIT is completed, the sample is consolidated. The procedure is best explained
with an example. Consider BRE Properties Inc. The news days are first identified
for this REIT. In a second step the news days are matched with its no-news days
by day-of-the-week. In the third step, using times (hour and minute) flagged for
news days we flag corresponding times for no-news days. The flagged times for
news and no-news days extend for four quarter-hours. Both trades and quotes are
matched this way. Note, that we also count the number of trades or quotes (on a
per minute basis) for the news and matched no-news samples. Given that activity
might accelerate or decelerate after a news release, these frequencies will likely
differ. This is to be expected and allows us to track activity after the news releases.
Summary Statistics
This study considers a total of 4,867 news stories, of which 4,051 are REIT-
specific, while 816 are macroeconomic. Panels A, B, and C in Exhibit 1 present
the frequency of REIT-specific news stories by hour, day-of-month, and month-
of-year, respectively. In Panel A, the hourly frequencies of public information
appear elevated at opening and toward the close of trading. More than 40% of
information releases occur between 8:00 a.m. and 9:00 a.m. The last hour, between
3:00 p.m. and 4:00 p.m., accounts for another 6%.13 The unevenness in the arrival
of information, apparent from Exhibit 1, and the trading activity that accounts for
this, is matched by corresponding trading activity in the control sample.
The distribution across days of the month, shown in Panel B of Exhibit 1, suggests
a clustering in the first few days of the month. Close to 30% of the releases are
accounted for by about the 8th day. Some elevation is also noted between the 24th
and 26th days of the month. Across months (Panel C) considerable variation is
noted. February, April, May, July, and October appear to be high information
months, while June, September, and December are low information months.14
J R E R Vo l . 3 4 N o . 4 2 0 1 2
E x h i b i t 1 Distribution of REIT News
1,400
Across Hours
1,200
1,000
800
600
400
200
0
0 2 4 6 8 10 12 14 16 18 20 22 24
180
Across Days
170
160
150
140
130
120
110
100
90
0 4 8 12 16 20 24 28 32
500
Across Months
400
300
200
100
0
1 2 3 4 5 6 7 8 9 10 11 12 13
The figure provides the distribution of REIT-specific news across different periods. The shaded area in the top-most
graph identifies the primary opening period on the NYSE (from 9:30 a.m. to 4:00 p.m.).
Exhibit 2 shows the distribution of news stories across the 61 REITs. There is
wide variation. The highest number (113) relate to Federal Realty Investment Trust
(FRT), followed by Equity One Inc. (EQY), while the fewest (22) belong to
Universal Health Realty Income Trust (UHT). The mean number of stories across
the companies is 66, and the median is 67. Also shown in Exhibit 2 are the tickers
of the sampled REITs.
The distribution of macroeconomic announcements is highly predictable. The bulk
of the announcements occur in the 8:00 a.m. hour (55%), a smaller percentage in
the next hour (15%), and the balance (30%) at the 10:00 a.m. hour. The
distribution across days show the early part of the month (16), witnessing about
30% of the releases. Also, given the well-defined schedule of the monthly
macroeconomic news cycle, their frequency is fairly even across the different
months in a calendar year.
Empirical Results
Tr a d e - a n d Q u o t e - s i d e R e s p o n s e s t o N e w s
News Effects. We estimate several regressions to identify trade- and quote-side

responses to public information. Four notes are in order. First, the absolute return
measure is employed to gauge information effects on price changes. If market
participants form unbiased expectations concerning forthcoming news stories, then
positive surprises in the news will likely be counter-balanced by negative surprises
and the return measure will render the coefficient estimates on the binary variables
to be insignificant. Second, since sample sizes are extremely large, significance
only at the 0.01% level or better are discussed.15 Third, given that we match by
hour, minute, and day-of-the-week, the estimate of differences between news and
its no-news control strictly mirrors the effects of information. Fourth, with the
framework we employ, overlapping announcements have to be accounted for. This
task is delicate (and painstaking). Not only are economic indicators contaminated
with each other (e.g., Capacity Utilization and Industrial Production are released
together), but they can also interact with REIT-specific news. These
contaminations are tracked and accounted for across the four quarter-hours. It is
possible that some announcements overlap over some periods within a 60-minute
interval, but not in others. This is also accounted for.16
The regressions investigate responses between two economic regimes
(expansionary vs. contractionary), and responses based on REIT size, leverage,
and focus. Prior to conducting these tests, we estimate in preliminary regressions,
REIT responses to REIT-specific versus macroeconomic news. Consistent with
our earlier discussion, the evidence from these tests show REIT-specific news to
have noticeably differing effects from macroeconomic news. Also, the responses
to REIT-specific information (coefficient estimates) are generally larger than the
responses to macroeconomic news. More specifically, REIT-specific information
J R E R Vo l . 3 4 N o . 4 2 0 1 2
4 7 2

C h a t r a t h ,
E x h i b i t 2 Distribution of REIT News by REIT
120
C h r i s t i e - D a v i d ,
100
80
60
40
a n d
20
R a m c h a n d e r
0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61
E x h i b i t 2 (continued)
Distribution of REIT News by REIT
P u b l i c
The REITs are identified by their tickers provided below:
I n f o r m a t i o n ,
Mean 66
Median 67
Std. Dev. 25
J R E R
Sum 4051
1. ADC 6. BDN 11. CPT 16. EPR 21. FRT 26. HIW 31. KRC 36. MAA 41. O 46. PEI 51. REG 56. SNH
Vo l .
R E I T
2. AEC 7. BRE 12. CT 17. EQY 22. FUR 27. HME 32. LHO 37. MAC 42. OFC 47. PKY 52. RPT 57. SSS
3. AKR 8. CBL 13. CUZ 18. ESS 23. GRT 28. HPT 33. LRY 38. NHI 43. OHI 48. PSA 53. RYN 58. UDR
3 4
4. ALX 9. CLP 14. DX 19. FCH 24. GTY 29. HR 34. LTC 39. NHP 44. OLP 49. PSB 54. SFI 59. UHT
R e s p o n s e s
5. ARE 10. CMO 15. EGP 20. FR 25. HCN 30. HT 35. LXP 40. NNN 45. PCH 50. RAS 55. SKT 60. WRE
N o .
4 2 0 1 2

4 7 3
increases trading and quoting activity much more than macroeconomic news. In
fact, contractions in trading activity are noted in several quarter-hours after
macroeconomic news. Larger trade sizes and narrower spreads are also noted after
REIT-specific news. It appears that traders and specialists take time to interpret
and resolve information in economic releases.17 We also find REIT responses to
be timely. The evidence that follows further corroborates these findings.
Distinguishing Responses between the Two Periods. We employ the regression:
Yi,t 0 1REITNEWSi,t 2MACS 3D0708

4REITNEWS*D0708 5MACS*D0708 i,t (1)
to examine responses between the two periods (0203 vs. 0708). Yi represents a
given market activity variable for stock i, such as the number of trades,
REITNEWSi,t takes a value of 1 for a news story that is REIT-specific and 0
otherwise; MACSi,t takes a value of 1 for a news story that is macroeconomic and
0 otherwise. D0708 (D0203) are period (binary) variables taking a value of 1 if the
activity is in the second (first) period, and 0 otherwise. We conduct these
regressions separately for each quarter-hour. D0203 is omitted from these
regressions. Thus, 0 provides an estimate of mean (say) trades during no-news
for each quarter-hour during the first period (0203). The effects of REITNEWS
(vs. the No-news control) in 0203 is thus estimated by (0 1) (0) 1.
A corresponding interpretation follows for the second period (0708). That is, the
No-news estimate is given by (0 3), and the effects of REITNEWS (vs. the
No-news control) in 0708 is estimated by (0 1 3 4) (0 3)
(1 4). Similarly, MACS effects (vs. the No-news control) in 0203 (0708) is
estimated by 2(2 5). We also test to see how differently REITs respond to
each type of news between the two periods. For instance, to see if responses to
REITNEWS differed between 0708 versus 0203, we test the restriction 4 0,
and with MACS we test the restriction 5 0. The trade- and quote-side results
are reported in Exhibit 3. Panel A of shows estimates from the regression, and
Panel B reports results from tests of restrictions where the effects of either
REITNEWS or MACS versus its No-news control is reported. In Panel C, the effects
of each news type in 0708 (vs. its No-news control) is tested against its
corresponding effects in 0203.
The findings provide interesting contrasts. Consider trade-side responses.
Although there is an elevation in the number of trades in both periods following
REITNEWS, this is much larger in 0708 than in 0203 for all four quarter-hours.
It is tempting to suggest that this increase simply reflects growth in trading
between the two periods, but this is not the case. Our methods compare news
versus no-news in each period, and accounts for such growth. Thus, comparisons
reflect purely news effects. Additionally, decreases in trading after MACS are more
pronounced in 0708. In fact, in 0203, the estimates are insignificant. The evidence
E x h i b i t 3 News Effects Across Two Periods: Trade-side
Trades Q1 Q2 Q3 Q4
Panel A: Regression estimates
Intercept 1.618* 1.745* 1.765* 1.732*

REITNEWS 0.414* 0.454* 0.412* 0.342*
MACS 0.044 0.011 0.015 0.001
D0708 4.302* 4.129* 4.061* 3.597*
REITNEWS*D0708 3.156* 2.269* 1.828* 1.280*
MACS*D0708 0.060 0.321* 0.293* 0.337*
Panel B: News vs. No-news
REITNEWS / 0708 3.570* 2.723* 2.240* 1.621*

REITNEWS / 0203 0.414* 0.454* 0.412* 0.342*
MACS / 0708 0.016 0.310* 0.308* 0.336*
MACS / 0203 0.044 0.011 0.015 0.001
Panel C: 0708 vs. 0203
REITNEWS 3.156* 2.269* 1.828* 1.280*

MACS 0.060 0.321* 0.293* 0.337*
Adj. R2 0.1131 0.1110 0.1127 0.0983
Obs. 796101 857705 871561 835142
Trade Size Q1 Q2 Q3 Q4
Intercept 775.623* 439.711* 433.076* 437.225*

REITNEWS 342.686* 269.759* 174.934* 195.013*
MACS 132.753* 35.679* 23.646* 59.766*
D0708 315.494* 266.605* 263.881* 266.662*
REITNEWS*D0708 354.008* 252.733* 158.924* 184.072*
MACS*D0708 73.938 40.608* 24.125 60.001*
REITNEWS / 0708 11.322 17.026 16.010 10.941

REITNEWS / 0203 342.686* 269.759* 174.934* 195.013*
MACS / 0708 206.691* 4.929 0.479 0.235
MACS / 0203 132.753* 35.679* 23.646* 59.766*
J R E R Vo l . 3 4 N o . 4 2 0 1 2
News Effects Across Two Periods: Trade-side
Panel C: 0708 vs. 0203
REITNEWS 354.008* 252.733* 158.924* 184.072*

MACS 73.938 40.608* 24.125* 60.001*
Adj. R2 0.0019 0.0121 0.0136 0.0051
Obs. 796101 857705 871561 835142
Variance Q1 Q2 Q3 Q4
Intercept 0.817* 0.677* 0.617* 0.575*

REITNEWS 0.057 0.096* 0.108* 0.032
MACS 0.003 0.012 0.012 0.039*
D0708 0.043* 0.117* 0.129* 0.116*
REITNEWS*D0708 0.097* 0.076 0.032* 0.084*
MACS*D0708 0.056* 0.028 0.021 0.040*
REITNEWS / 0708 0.154* 0.172* 0.140* 0.116*

REITNEWS / 0203 0.057 0.096* 0.108* 0.032
MACS / 0708 0.053* 0.016 0.009 0.001
MACS / 0203 0.003 0.012 0.012 0.039*
Panel C: 0708 vs. 0203
REITNEWS 0.097* 0.076* 0.032 0.084*

MACS 0.056* 0.028 0.021 0.040*
2
Adj. R 0.0005 0.0031 0.0045 0.0044
Obs. 754688 856901 871115 834853
Quotes Q1 Q2 Q3 Q4
Intercept 3.741* 4.153* 4.261* 4.259*

REITNEWS 0.374 0.435 0.414 0.314
MACS 0.053 0.069 0.000 0.070
D0708 45.330* 47.342* 48.860* 44.782*
REITNEWS*D0708 8.146* 8.885* 6.101* 3.174*
MACS*D0708 0.172 1.692* 0.564 0.714
REITNEWS / 0708 8.520* 9.320* 6.515* 3.488*

REITNEWS / 0203 0.374 0.435 0.414 0.314
MACS / 0708 0.120 1.622* 0.565* 0.784*
MACS / 0203 0.053 0.069 0.000 0.070
Panel C: 0708 vs. 0203
REITNEWS 8.146* 8.885* 6.101* 3.174*

MACS 0.172 1.692* 0.564 0.714
Adj. R2 0.1689 0.1849 0.1906 0.1831
Obs. 1190248 1316417 1325586 1309525
Depths Q1 Q2 Q3 Q4
Intercept 13.532* 13.987* 14.786* 15.523*

REITNEWS 5.445* 5.883* 5.005* 4.795*
MACS 0.476* 0.777* 0.215 0.320
D0708 5.841* 6.592* 7.286* 7.907*
REITNEWS*D0708 1.283* 3.009* 2.943* 3.127*
MACS*D0708 0.826* 0.968* 0.203 0.298
REITNEWS / 0708 4.162* 2.875* 2.063* 1.667*

REITNEWS / 0203 5.445* 5.883* 5.005* 4.795*
MACS / 0708 0.350* 0.191 0.012 0.022
MACS / 0203 0.476* 0.777* 0.215 0.320
Panel C: 0708 vs. 0203
REITNEWS 1.283* 3.009* 2.943* 3.127*

MACS 0.826* 0.968* 0.203 0.298
Adj. R2 0.018 0.0279 0.0248 0.0256
Obs. 1190248 1316417 1325586 1309525
J R E R Vo l . 3 4 N o . 4 2 0 1 2
BAS Q1 Q2 Q3 Q4
Intercept 10.560* 7.240* 6.520* 6.340*

REITNEWS 1.570 0.948 0.994* 1.320*
MACS 0.128 0.526* 0.497* 0.129
D0708 2.270* 2.320* 2.380* 2.690*
REITNEWS*D0708 0.381 0.683 0.221 0.517
MACS*D0708 0.375 0.449 0.306 0.152
REITNEWS / 0708 1.189 1.630* 0.773 0.803

REITNEWS / 0203 1.570 0.948 0.994* 1.320*
MACS / 0708 0.503 0.077 0.191 0.281
MACS / 0203 0.128 0.526* 0.497* 0.129
Panel C: 0708 vs. 0203
REITNEWS 0.381 0.683 0.221 0.517

MACS 0.375 0.449 0.306 0.152
2
Adj. R 0.0005 0.0013 0.0016 0.0022
Obs. 1190248 1316417 1325586 1309525
Notes: To examine if responses to public information depend on the state of the economy, we
document REIT responses in two periods (200203 vs. 200708). We employ the regression
Yi,t 0 1REITNEWSi,t 2MACS 3D0708 4REITNEWS*D0708 5 MACS*D0708 i,t,
where the Yi, REITNEWSi,t, and MACSi,t, are as defined earlier, and D0708 (D0203) takes a value
of 1 if the activity is in the second (first) period, and 0 otherwise. Employing binary variables for
each quarter-hour in a single regression (like in Exhibit 3) will make the interpretation
unnecessarily complicated. Therefore, we conduct these regressions separately for each quarter-
hour. Since we omit D0203 from these regressions, 0 provides an estimate of mean (say) trades
during no-news intervals for each quarter-hour during the first period (0203). Panel A shows
estimates from the regression, Panel B the results of tests of restrictions where each news type is
tested against its No-news control in each period. In Panel C, we test each news types effect
(against its No-news control) in 0708 versus its corresponding effect in 0203. The estimates for
variances and BAS have been multiplied by a factor 103.
* Significant at the 0.01% level or better.
taken together, show REIT responses to be more intense to both news elements
in the second period. While these effects extend to trade sizes, there is a key
difference. Although trade sizes in 0708 increase after REITNEWS, these increases
are smaller than in 0203. Similarly, reductions in trade size after MACS are larger
in 0708 than in 0203. Furthermore, the news in 0708, whether REITNEWS or
MACS, contribute in larger ways to a reduction in price variance. The changing
economic climate appears to play a large role in how information is processed.
There are also differences in quoting activity between the two periods. Rising
frequencies in the number of quotes after REITNEWS is again more pronounced
in 0708 than in 0203. However, the reductions after MACS, noted in both periods,
do not appear to be significantly different. Depths (like trade sizes) are
significantly smaller in 0708, irrespective of news type.18
The findings in Exhibit 3 point to a fundamental difference in how traders and
specialists respond to news in differing economic climates. The uncertainty in
0708 shows participants engaging in more rapid adjustments in this period than
in 0203. However, the smaller sizes and lower depths are indicative of the caution
with which these trades are executed.
The evidence from these regressions are also consistent with the findings noted
earlier (preliminary regression) in that responses to REIT-specific information is
much more pronounced than to macroeconomic news. For example, the first
quarter-hour trades estimates for REITNEWS in 0203 (0.414) is more than nine
times larger than the corresponding estimate for MACS (0.044). This pattern of
larger responses to REITNEWS holds even when we examine the mediating role
of REIT size, leverage, and focus.
The evidence in Exhibit 3 suggests that our examination of the effects of REIT
size, leverage, and focus must account for this shift in trading dynamic.
Accordingly, we conduct regressions separately for the two periods. This approach
has an added advantage, in that it provides insights into the contemporaneous
effects these factors have on market activity in two differing economic
environments.19
Size, Leverage, and Focus Effects
In this part of the analysis we examine if news responses can be explained in

systematic ways within the context of REIT size, leverage, and focus.
Framework. The REITs are divided into terciles based on year-end total asset
size. Large-, medium-, and small-sized REITs, denoted LREIT, MSREIT, and
SREIT, respectively, are rebalanced at the end of the year to reconstitute the
portfolios for the next year.20
The following regression:
J R E R Vo l . 3 4 N o . 4 2 0 1 2
Yi,t 0 1LREITi,t 2MSREITi,t 3MACSi,t

4REITNEWSi,t 5LREIT*MACSi,t
6LREIT*REITNEWSi,t 7MSREIT*MACSi,t
8MSREIT*REITNEWS i,t, (2)
is estimated, where LREIT and MSREIT are binary variables, taking on a value 1
for REITs categorized as large or medium, and 0 otherwise. Note SREIT is omitted
from the regression. The other variables in the regression are as defined before.
The interaction terms identify the differential news impact based on REIT size
and news type and tests of restrictions (F-tests) identify the effects of size.21
Care needs to be exercised in interpreting news effects on the three REIT
categories. For example, given that SREIT is omitted from equation (3), the
intercept 0 captures its impact over no-news intervals. Thus, the restriction 3
0 (i.e., 3 0 0 0) tests the effects of MACS on these REITs with respect
to its No-news control, while the restriction 4 0 tests the corresponding effects
of REITNEWS. Continuing with this interpretation, the restriction 3 5
0(4 6 0) tests the effects of MACS (REITNEWS) on LREIT with respect to
its No-news control, and so on. Thus, these estimates give the effects of news
(either REITNEWS or MACS) on a particular REIT size category.
To examine effects between the three size categories, the effects of news
(REITNEWS or MACS) on one size category (vs. its No-news control) has to be
compared against another size categorys corresponding effect. For example, to
test for potentially differing effects between LREIT and SREIT following
REITNEWS, we test the restriction 6 0.22
For brevity, we omit reporting the coefficient estimates i (1 0,1,2..,8) in
equation (2), and report only results of F-tests that test restrictions. These results
are shown in Exhibits 4 (trade-side) and 5 (quote-side). The findings for the second
period (0708) are shown in Panel A and for the first period (0203) in Panel B.
To avoid unnecessary complexities, given interactions between market activity
(trade- and quote-side activity), the factors (size, leverage, and focus), and
economic regimes (0203 vs. 0708)), we report below only the main findings.
REIT Size Effects. The results show that REIT size effects manifest in pronounced
ways during downturns than otherwise. For instance, in the second quarter-hour
following REITNEWS in 0708, the estimate for large REITs (vs. No-news) is
3.349. This is more than seven times its value in 0203 (0.436), and is significantly
higher than either the estimate for medium REITs or small REITs in 0708.
Quoting frequency also increases following REITNEWS for all three categories.
Again larger REITs exhibit the highest increases in 0708. Its estimate in the first
E x h i b i t 4 Size Effects: Trade-side
Trades 0708 Trades 0203
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Panel A: REITNEWS vs. No-news
P u b l i c
Large 4.350* 3.349* 2.609* 1.948* 0.420* 0.436* 0.417* 0.362*
Medium 3.044* 1.722* 1.542* 1.007* 0.390* 0.491* 0.405* 0.303*
Small 1.410* 1.702* 1.314* 0.817* 0.285* 0.267* 0.228* 0.187*
Large vs. Small 2.940* 1.648* 1.294* 1.132* 0.134* 0.168* 0.189* 0.175*
Large vs. Medium 1.307* 1.627* 1.066* 0.942* 0.029 0.055 0.012 0.059
J R E R
Medium vs. Small 1.634* 0.021 0.228 0.190 0.105 0.223* 0.177* 0.117
Panel B: MACS vs. No-news
0.035 0.456* 0.417* 0.420* 0.009

Vo l .
Large 0.058* 0.029 0.027
R E I T
Medium 0.115 0.204* 0.216* 0.279* 0.039* 0.003 0.014 0.022
Small 0.058 0.054 0.212* 0.248* 0.032 0.001 0.006 0.005
3 4
R e s p o n s e s
Large vs. Small 0.023 0.401* 0.205* 0.171 0.025 0.030 0.002 0.032
Large vs. Medium 0.149 0.252* 0.202* 0.141 0.019 0.026 0.006 0.049*
N o .
Medium vs. Small 0.172 0.150 0.003 0.030 0.006 0.004 0.008 0.017
Adj. R2 0.0531 0.0499 0.0460 0.0377 0.0251 0.0234 0.0239 0.0228
4 2 0 1 2
Obs. 543345 590446 598284 576227 252756 267259 273277 258915

4 8 1
4 8 2

Size Effects: Trade-side
C h a t r a t h ,
Trade Size 0708 Trade Size 0203
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Large 40.175 16.212* 15.087* 12.462* 221.431* 223.496* 172.499* 205.638*

Medium 28.550 20.121* 13.259 10.662 275.255 269.609* 149.210* 133.341
Small 79.385 7.255 16.012 1.040 936.327* 435.902* 212.181* 272.801
Large vs. Small 119.559 8.957 0.925 11.423 714.896* 212.406 39.682 67.163
Large vs. Medium 68.724 3.909 1.828 1.800 53.824 46.112 23.289 72.297
Medium vs. Small 50.835 12.866 2.753 9.622 661.072* 166.293 62.971 139.460
a n d
Large 164.946* 7.860* 2.941 2.804 116.069* 44.581 8.511 104.732*
R a m c h a n d e r
Medium 189.882* 4.173 0.911 2.846 161.188* 29.100 44.274 19.748
Small 311.151* 0.227 2.021 0.280 116.650 27.140 29.424 20.362
Large vs. Small 146.205* 7.633 4.962 2.524 0.580 17.441 20.913 84.370
Large vs. Medium 24.936 3.687 3.852 5.650 45.118 15.482 35.763 84.984
Medium vs. Small 121.268 3.946 1.110 3.126 44.538 1.959 14.850 0.614
Adj. R2 0.0004 0.0006 0.0010 0.0008 0.0005 0.0007 0.0006 0.0003
Obs. 543345 590446 598284 576227 252756 267259 273277 258915
Variance 0708 Variance 0203
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
P u b l i c
Large 0.126* 0.140* 0.097* 0.076* 0.079 0.071* 0.055 0.004

Medium 0.092* 0.092* 0.088* 0.062* 0.081 0.120* 0.120* 0.009
Small 0.151* 0.252* 0.203* 0.187* 0.284* 0.000 0.081 0.047
Large vs. Small 0.025 0.112* 0.106* 0.111* 0.042* 0.000 0.011 0.021
Large vs. Medium 0.034 0.048 0.008 0.014 0.022 0.012 0.001 0.046*
J R E R
Medium vs. Small 0.059 0.160* 0.114* 0.125* 0.065 0.074* 0.004 0.053*
Vo l .
Large 0.030 0.013 0.007 0.003 0.363* 0.152* 0.027 0.044
R E I T
Medium 0.039* 0.007 0.009 0.000 0.003 0.049 0.065 0.012
3 4
Small 0.139* 0.058* 0.019 0.003 0.366* 0.201* 0.038 0.056
R e s p o n s e s
Large vs. Small 0.110* 0.045* 0.012 0.001 0.106* 0.074* 0.008 0.032
0.006 0.003 0.063 0.024

N o .
Large vs. Medium 0.010 0.002 0.011 0.010

Medium vs. Small 0.100* 0.050* 0.010 0.002 0.043 0.086* 0.003 0.008
Adj. R2 0.0212 0.0332 0.0374 0.0349 0.0213 0.0290 0.0304 0.0289
4 2 0 1 2
Obs. 531490 590312 598247 576197 223198 266589 272868 258656

4 8 3
4 8 4

C h a t r a t h ,
Notes: The REITs are divided into terciles based on year-end total asset size. Large-, medium-, and small-sized REITs, denoted LREIT, MSREIT, and SREIT,
respectively, are rebalanced at the end of the year to reconstitute the portfolios for the next year. The following regression, Yi,t 0 1LREITi,t
2MSREITi,t 3MACSi,t 4REITNEWSi,t 5LREIT*MACSi,t 6LREIT*REITNEWSi,t 7MSREIT*MACSi,t 8MSREIT*REITNEWS i,t, is estimated,
where LREIT and MSREIT are binary variables, taking on a value 1 for REITs categorized as large or medium, respectively, and 0 otherwise. Note, SREIT is
omitted from the regression. Thus the intercept captures its effects during no-news intervals. The interaction terms identify the differential news impact based
a n d
on REIT size and news type and tests of restrictions (F-tests) identify the effects of size. For brevity, we omit reporting the coefficient estimates i (1 0, 1,
2..., 8) in the above equation and report only results of F-tests that test restrictions. Note that variances have been multiplied by a factor 103.
R a m c h a n d e r
E x h i b i t 5 REIT Size Effects: Quote-side
Quotes 0708 Quotes 0203
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
P u b l i c
Large 9.050* 10.198* 7.549* 3.990* 0.388* 0.378* 0.308* 0.184*
Medium 4.251* 1.722 0.237 2.216 0.366* 0.481* 0.509* 0.405*
0.039 0.036
Small 4.138* 8.339* 3.400 1.991 0.078 0.003
Large vs. Small 4.911* 1.858 4.148 1.999 0.309* 0.375* 0.347* 0.220
Large vs. Medium 4.799* 8.475* 7.312* 6.206* 0.021 0.103 0.201 0.221
J R E R
Medium vs. Small 0.113 6.617* 3.164 4.207 0.288* 0.478* 0.548* 0.441*
1.703* 0.374 0.940 0.028

Vo l .
Large 0.170 0.154* 0.168* 0.030
R E I T
Medium 0.839 1.601* 0.348 0.032 0.053 0.014 0.007 0.153*
Small 0.285 0.325 0.137 0.737 0.080 0.021 0.011 0.030
3 4
R e s p o n s e s
Large vs. Small 0.455 1.377 0.237 0.203 0.234* 0.147* 0.041 0.058
Large vs. Medium 0.669 0.101 0.026 0.908 0.101 0.154* 0.023 0.125*
N o .
Medium vs. Small 1.124 1.276 0.211 0.706 0.133* 0.007 0.018 0.183*
Adj. R2 0.0292 0.0282 0.0259 0.0217 0.0084 0.0183 0.0209 0.0194
4 2 0 1 2
Obs. 698681 769387 772608 767108 491567 547030 552978 542417

4 8 5
4 8 6

REIT Size Effects: Quote-side
C h a t r a t h ,
Depths 0708 Depths 0203
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Large 1.666* 2.056* 1.182* 0.772 5.557* 6.790* 5.380* 4.493*

Medium 8.098* 5.287* 2.985* 2.643* 5.443* 4.637* 4.427* 4.064*
Small 2.667* 0.351 1.618* 1.224 4.411* 4.290* 3.464* 4.702*
Large vs. Small 1.001 1.704* 0.437 0.452 1.146 2.500* 1.915 0.209
Large vs. Medium 6.432* 3.232* 1.804* 1.870* 0.115 2.153* 0.953 0.429
Medium vs. Small 5.431* 4.936* 1.367 1.419 1.032 0.347 0.962 0.638
a n d
Large 0.519* 0.171 0.025 0.312 0.203 0.631* 0.315 0.903*
R a m c h a n d e r
Medium 0.098 0.073 0.353 0.083 0.833* 1.179* 0.486 0.416
Small 0.586* 0.263 0.250 0.285 0.501 0.545 0.227 0.206
Large vs. Small 0.067 0.093 0.226 0.597 0.298 0.086 0.542 0.696
Large vs. Medium 0.617* 0.097 0.378 0.394 0.630 0.548 0.172 1.319*
Medium vs. Small 0.684* 0.190 0.604* 0.203 0.332 0.634 0.714 0.623
Adj. R2 0.0023 0.0028 0.0019 0.0014 0.0019 0.0039 0.0039 0.0068
Obs. 698681 769387 772608 767108 491567 547030 552978 542417
BAS 0708 BAS 0203
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
P u b l i c
Large 0.690 0.720 0.670 0.619 2.770* 1.920* 2.290* 2.290*

Medium 0.060 0.350 0.363 0.391 1.150 0.760 0.780 0.570
Small 1.220 2.570* 0.510 0.034 7.130* 4.960* 5.250* 2.980*
Large vs. Small 1.910 1.850 1.180 0.653 9.900* 6.880* 7.540* 5.270*
Large vs. Medium 0.750 0.370 0.307 0.227 1.620 1.160 1.510 1.720
J R E R
Medium vs. Small 1.160 2.220* 0.873 0.425 8.280* 5.720* 6.030* 3.550*
Vo l .
Large 0.280 0.187 0.189 0.130 0.350 0.280 0.120 0.159
R E I T
Medium 0.200 0.172 0.166 0.120 0.040 0.060 0.050 0.066
3 4
Small 1.770* 0.299 0.821* 1.030* 1.760* 1.350* 1.930* 0.445
R e s p o n s e s
Large vs. Small 1.490* 0.486 1.010* 1.160* 2.110* 1.070 2.050* 0.604
0.080 0.015 0.023 0.010 0.170 0.225

N o .
Large vs. Medium 0.390 0.220

Medium vs. Small 1.570* 0.471 0.987* 1.150* 1.720 1.290 1.880* 0.379
Adj. R2 0.0164 0.0122 0.0122 0.0115 0.0219 0.0141 0.0126 0.0130
4 2 0 1 2
Obs. 698681 769387 772608 767108 491567 547030 552978 542417

4 8 7
4 8 8

C h a t r a t h ,
Notes: The REITs are divided into terciles based on year-end total asset size. Large-, medium-, and small-sized REITs, denoted LREIT, MSREIT, and SREIT,
respectively, are rebalanced at the end of the year to reconstitute the portfolios for the next year. The following regression, Yi,t 0 1LREITi,t
2MSREITi,t 3MACSi,t 4REITNEWSi,t 5LREIT*MACSi,t 6LREIT*REITNEWSi,t 7MSREIT*MACSi,t 8MSREIT*REITNEWS i,t, is estimated,
where LREIT and MSREIT are binary variables, taking on a value 1 for REITs categorized as large or medium, respectively, and 0 otherwise. Note, SREIT is
omitted from the regression. Thus the intercept captures its effects during no-news intervals. The other variables in the regression are as defined before. The
a n d
interaction terms identify the differential news impact based on REIT size and news type and tests of restrictions (F-tests) identify the effects of size. For
brevity, we omit reporting the coefficient estimates i (1 0, 1, 2...,8) in the above equation and report only results of F-tests that test restrictions. Note that
BAS has been multiplied by a factor 103.
R a m c h a n d e r
quarter-hour in 0708 (vs. No-news) is 9.050, much larger than its value in 0203
(0.388).
The type of news, the state of the economy, and REIT size all matter. For instance,
contractions in trading frequency following MACS are pronounced for large REITs
in 0708, and significantly larger than the declines noted for medium- or smaller-
sized REITs (see the second and third quarter-hours). In 0203, these responses
show little evidence of REIT-size effects.
Size effects are less evident with trade sizes and depths (see Exhibit 4). However,
the size effects on risk measures are significant. Both price variance and spreads
are impacted. In economic downturns, REITNEWS leads to reductions in variance
for all three REITs, but most for smaller REITs (see the second through fourth
quarter-hours). Spreads also widen more for these REITs, not only after MACS
(0708, 0203), but also after REITNEWS (0203). This makes good sense given the
riskiness of smaller REITs. That specialists widen spreads with smaller REITs
even after information releases is understandable, in that there is greater likelihood
of mispricing with these REITs.
There is also evidence of the presence of informationally-driven size-based
clienteles. For instance, the pronounced elevation in trading and quoting following
REITNEWS for large REITs is consistent with the notion that following news
events, certain-sized REITs attract short-term traders in greater numbers than
others.
Leverage Effects. To examine leverage effects, REITs are similarly categorized
into thirds, from highest to lowest leverage (HREIT, MLREIT, and LOREIT),
based on the ratio of long-term debt/stockholder equity, using book values.23 The
regression employed to test leverage effects is similar to equation (2) and is given
by:
Yi,t 0 1HREITi,t 2MLREITi,t 3MACSi,t

4REITNEWSi,t 5HREIT*MACSi,t
6HREIT*REITNEWSi,t 7MLREIT*MACSi,t
8MLREIT*REITNEWS i,t, (3)
where HREIT and MLREIT are binary and take a value of 1 for REITs with high
or medium leverage, respectively, and 0 otherwise. The other variables are as
defined earlier. The variable LOREIT is excluded from the regression, so that the
intercept captures its impact over no-news intervals. The results from equation (3)
are reported in Exhibits 6 (trade-side) and 7 (quote-side).
The findings suggest that highly leveraged REITs are much more sensitive to
information generally than the other two categories, and in downturns this
J R E R Vo l . 3 4 N o . 4 2 0 1 2
4 9 0
E x h i b i t 6 Leverage Effects: Trade-side

C h a t r a t h ,
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
High 4.266* 3.819* 3.047* 2.019* 0.342* 0.353* 0.332* 0.329*
Medium 2.932* 1.810* 1.397* 1.054* 0.373* 0.400* 0.383* 0.306*
Low 3.509* 2.490* 2.292* 1.824* 0.534* 0.634* 0.533* 0.401*
High vs. Low 0.757* 1.328* 0.755* 0.196 0.192* 0.281* 0.201* 0.071
High vs. Medium 1.334* 2.009* 1.650* 0.965* 0.031 0.047 0.051 0.023
Medium vs. Low 0.577* 0.680* 0.895* 0.769* 0.161* 0.233* 0.150* 0.094
a n d
High 0.070 0.372* 0.364* 0.362* 0.046* 0.020 0.013 0.028
Medium 0.087 0.155* 0.251* 0.323* 0.051* 0.021 0.009 0.020
R a m c h a n d e r
Low 0.062 0.401* 0.304* 0.317* 0.035* 0.004 0.023 0.045*
High vs. Low 0.008 0.029 0.060 0.045 0.011 0.024 0.010 0.072*
High vs. Medium 0.157 0.217* 0.113 0.039 0.004 0.001 0.003 0.008
Medium vs. Low 0.149 0.246* 0.053 0.006 0.015 0.025 0.014 0.065*
Adj. R2 0.0081 0.0061 0.0049 0.0034 0.0064 0.0062 0.0051 0.0038
Obs. 543345 590446 598284 576227 252756 267259 273277 258915
Leverage Effects: Trade-side
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
P u b l i c
High 66.455 14.240 14.069* 6.046 450.062* 266.914* 141.027* 247.823*

Medium 90.022 9.115 10.155 5.713 234.385 303.433* 182.730* 211.802
Low 12.545 29.726* 24.764* 22.584* 374.472* 225.776* 203.554* 117.238
High vs. Low 79.000 15.486 10.696 16.538 75.590 41.137 62.527 130.585
High vs. Medium 156.477 5.125 3.914 0.332 215.677 36.519 41.703 36.022
J R E R
Medium vs. Low 77.477 20.612 14.610 16.870 140.086 77.656 20.824 94.564
Vo l .
High 37.299 39.782
R E I T
Medium 242.773* 0.407 2.729 5.991* 118.418 33.378 30.734 122.573*
3 4
Low 225.176* 8.811* 4.103 3.377 160.365* 16.774 2.293 4.979
R e s p o n s e s
High vs. Low 69.207 3.110 3.869 0.058 38.668 42.853 35.006 34.803
5.294 2.963 9.309* 3.279 82.792

N o .
High vs. Medium 86.804 26.249 6.565

Medium vs. Low 17.597 8.403 6.832 9.367* 41.947 16.603 28.441 117.595
Adj. R2 0.0003 0.0004 0.0006 0.0005 0.0005 0.0006 0.0003 0.0002
4 2 0 1 2
Obs. 543345 590446 598284 576227 252756 267259 273277 258915

4 9 1
4 9 2

C h a t r a t h ,
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
High 0.170* 0.204* 0.159* 0.119* 0.125* 0.126* 0.160* 0.039

Medium 0.126* 0.129* 0.101* 0.082* 0.011 0.058 0.029 0.026
Low 0.166* 0.182* 0.162* 0.149* 0.040 0.097* 0.143* 0.018
High vs. Low 0.005 0.022 0.003 0.030 0.084 0.028 0.017 0.021
High vs. Medium 0.044 0.075 0.058 0.037 0.114 0.068 0.131* 0.014
Medium vs. Low 0.040 0.053 0.061 0.067* 0.030 0.039 0.114* 0.008
a n d
High 0.069* 0.035* 0.014 0.009 0.009 0.022 0.016 0.058*
R a m c h a n d e r
Medium 0.053* 0.016 0.005 0.002 0.021 0.017 0.008 0.013
Low 0.035 0.007 0.007 0.004 0.038 0.009 0.010 0.047*
High vs. Low 0.035 0.042* 0.008 0.013 0.047 0.030 0.006 0.010
High vs. Medium 0.016 0.019 0.009 0.011 0.012 0.005 0.008 0.044
Medium vs. Low 0.019 0.023 0.002 0.001 0.059 0.026 0.002 0.034
Adj. R2 0.0007 0.0013 0.0013 0.0013 0.0031 0.0046 0.0049 0.0046
Obs. 531490 590312 598247 576197 223198 266589 272868 258656
P u b l i c
Notes: To examine leverage effects, REITs are similarly categorized into thirds, from highest to lowest leverage (HREIT, MLREIT, and LOREIT), based on the
ratio of long-term debt / stockholder equity, using book values. The regression employed to test leverage effects is given by Yi,t 0 1HREITi,t
J R E R
2MLREITi,t 3MACSi,t 4REITNEWSi,t 5HREIT*MACSi,t 6HREIT*REITNEWSi,t 7MLREIT*MACSi,t 8MLREIT*REITNEWS i,t, where HREIT
and MLREIT are binary and take a value of 1 for REITs with high, or medium leverage, respectively, and 0 otherwise. LREIT is excluded from the regression,
so that the intercept captures its impact over no-news intervals. The interaction terms identify the differential news impact based on REIT leverage and news
type and tests of restrictions (F-tests) identify the effects of size. For brevity, we omit reporting the coefficient estimates i (1 0, 1, 2...,8) in the above
Vo l .
equation and report only results of F-tests that test restrictions. Note that variances have been multiplied by a factor 103.
R E I T
3 4
R e s p o n s e s
N o .
4 2 0 1 2

4 9 3
4 9 4
E x h i b i t 7 REIT Leverage Effects: Quote-side

C h a t r a t h ,
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
High 13.963* 17.027* 12.527* 7.821* 0.287* 0.267* 0.308* 0.173
Medium 5.342* 4.275* 1.514 1.294 0.169* 0.277* 0.109 0.110
Low 6.128* 6.359* 5.473* 4.208* 0.713* 0.815* 0.932* 0.747*
High vs. Low 7.835* 10.668* 7.054* 3.613 0.427* 0.548* 0.624* 0.574*
High vs. Medium 8.621* 12.752* 11.013* 9.114* 0.118 0.010 0.198 0.062
Medium vs. Low 0.786 2.085 3.959 5.502* 0.545* 0.538* 0.823* 0.637*
a n d
High 0.390 2.433* 0.981 1.584* 0.051 0.082* 0.023 0.000
Medium 0.170 0.782 0.518 0.418 0.078* 0.129* 0.026 0.060
R a m c h a n d e r
Low 0.170 1.654* 0.203 0.319 0.031 0.004 0.048 0.147*
High vs. Low 0.559 0.779 0.778 1.265 0.020 0.086 0.071 0.147*
High vs. Medium 0.220 1.650 0.464 1.166 0.027 0.047 0.003 0.060
Medium vs. Low 0.339 0.871 0.315 0.099 0.047 0.133* 0.074 0.087
Adj. R2 0.0013 0.0014 0.0010 0.0008 0.0013 0.0015 0.0014 0.0009
Obs. 698681 769387 772608 767108 491567 547030 552978 542417
REIT Leverage Effects: Quote-side
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
P u b l i c
High 1.210* 1.050* 0.544 0.424 5.638* 6.833* 6.160* 5.910*

Medium 2.039* 0.457 1.657* 0.903 4.816* 4.400* 4.127* 4.212*
Low 10.160* 7.924* 4.323* 4.037* 6.207* 6.887* 4.931* 4.246*
High vs. Low 8.949* 6.874* 3.779* 3.613* 0.569 0.055 1.230 1.663
High vs. Medium 0.829 0.593 1.113 0.479 0.822 2.433* 2.033* 1.697
J R E R
Medium vs. Low 8.121* 7.467* 2.667* 3.134* 1.391 2.488* 0.804 0.034
Vo l .
High 0.446* 0.019 0.029 0.158 1.036* 0.556 0.327 0.203
R E I T
Medium 0.461* 0.403* 0.122 0.027 0.090 0.626* 0.017 0.753*
3 4
Low 0.129 0.186 0.138 0.254 0.324 1.156* 0.330 0.054
R e s p o n s e s
High vs. Low 0.318 0.206 0.109 0.413 0.712 0.600 0.003 0.257
0.070
N o .
High vs. Medium 0.015 0.422 0.151 0.132 0.946* 0.310 0.550
Medium vs. Low 0.332 0.216 0.260 0.281 0.234 0.530 0.313 0.807*
Adj. R2 0.0019 0.0019 0.0008 0.0006 0.0016 0.0017 0.0011 0.0012
4 2 0 1 2
Obs. 698681 769387 772608 767108 491567 547030 552978 542417

4 9 5
4 9 6

C h a t r a t h ,
BAS 0708 BAS 0203
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
High 1.288 1.280 1.171* 1.175* 6.380* 4.050* 4.650* 4.240*

Medium 2.254* 3.018* 0.806 0.770 0.330 0.360 0.370 0.390
Low 0.554 0.748 0.523 0.605 3.020 2.500* 2.870* 1.230
High vs. Low 0.734 0.532 0.648 0.570 9.400* 6.550* 7.520* 5.470*
High vs. Medium 0.966 1.738 0.365 0.405 6.050* 3.690* 4.280* 3.850*
Medium vs. Low 1.700 2.270* 0.283 0.165 3.350 2.860 3.240* 1.620
a n d
High 0.645 0.323 0.255 0.158 0.300 1.333* 0.451 0.311
R a m c h a n d e r
Medium 0.713 0.722* 1.023* 1.178* 0.160 0.436 0.319 0.237
Low 0.122 0.116 0.137 0.132 1.010 0.277 0.716 0.245
High vs. Low 0.522 0.208 0.118 0.026 1.310 1.610* 0.264 0.556
High vs. Medium 0.068 1.045* 1.278* 1.336* 0.140 0.897 0.132 0.073
Medium vs. Low 0.590 0.837* 1.160* 1.310* 1.170 0.713 0.397 0.482
Adj. R2 0.0042 0.0027 0.0024 0.0021 0.0051 0.0043 0.0040 0.0042
Obs. 698681 769387 772608 767108 491567 547030 552978 542417
P u b l i c
Notes: To examine leverage effects, REITs are similarly categorized into thirds, from highest to lowest leverage (HREIT, MLREIT, and LOREIT), based on the
ratio of long-term debt / stockholder equity, using book values. The regression employed to test leverage effects is given by Yi,t 0 1HREITi,t
J R E R
2MLREITi,t 3MACSi,t 4REITNEWSi,t 5HREIT*MACSi,t 6HREIT*REITNEWSi,t 7MLREIT*MACSi,t 8MLREIT*REITNEWS i,t, where HREIT
and MLREIT are binary and take a value of 1 for REITs with high, or medium leverage, respectively, and 0 otherwise. LREIT is excluded from the regression,
so that the intercept captures its impact over no-news intervals. The interaction terms identify the differential news impact based on REIT leverage and news
type and tests of restrictions (F-tests) identify the effects of size. For brevity, we omit reporting the coefficient estimates i (1 0, 1, 2...,8) in the above
Vo l .
equation and report only results of F-tests that test restrictions. Note that variances have been multiplied by a factor 103.
R E I T
3 4
R e s p o n s e s
N o .
4 2 0 1 2

4 9 7
sensitivity is accentuated. Note the estimates for trading and quoting frequency
following REITNEWS for these REITs (vs. their No-news counterparts) for 0708
(0203) are 4.266 (0.342) and 13.963 (0.287), respectively, and significant,
underlining their increased sensitivity during downturns. The other two leverage
categories show similar patterns, but their effects are less pronounced.
The type of information, the economic climate, and the degree of leverage all
matter. For instance, in downturns, macroeconomic information leads to sharp
drops in trading for all three REIT categories (see the second through fourth
quarter-hours in 0708). Leverage, however, plays a minimal role with trade sizes,
but depths tend to be affected for low leveraged REITs. Rising depths are noted
for these REITs after REITNEWS in 0708. This suggests that even in times of
economic uncertainty, specialists feel confident about offering larger depths for
these REITs likely reflecting their lower leverage (and lower risk).
The effects on risk measures, although notable, show less evidence of leverage
effects. For example, all three categories exhibit sharp drops in variance after
REITNEWS in 0708 (see the first quarter-hour), but there is little evidence of
differences between them. On the other hand, spreads narrow more significantly
in every quarter-hour for highly levered REITs in 0203, but less frequently in
0708. This likely reflects the differing economic climate between the two periods
and the higher (bankruptcy) risk posed by these REITs in 0708 (compare this with
the evidence noted earlier with small-sized REITs (Exhibit 5), where widening
spreads after news releases are also noted but attributed more to mispricing).
Focus Effects. In the last series of regressions we examine REIT focus by
distinguishing between mortgage/hybrid REITs (MHREIT) and equity REITs
(EREIT). We employ the following regression,
Yi,t 0 1EREITi,t 2MACSi,t 3REITNEWSi,t

4EREIT*MACSi,t 5EREIT*REITNEWSi,t i,t, (4)
where EREIT is binary and takes a value of 1 for REITs with an equity-based
focus, and 0 otherwise.24 The other variables are as defined earlier. The intercept
represents the no-news interval for MHREIT, which is omitted from the regression.
The results for focus are reported in Exhibits 8 and 9.25
The findings suggest sharp differences between the two categories, especially in
the second period. We find that trades for mortgage/hybrid REITs are more than
twice as large as for equity REITs in 0708. For example, the estimate for
mortgage/hybrid REITs in the first quarter-hour in 0708 is 8.614, and much larger
than its equity counterpart (3.074). These differences are significant. While similar
patterns are noted in 0203, their differences are mostly insignificant. Quoting
activity mirrors these patterns.
E x h i b i t 8 Focus Effects: Trade-side
P u b l i c
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Equity 3.074* 2.290* 1.924* 1.364* 0.406* 0.465* 0.412* 0.334*
MHB 8.614* 7.343* 5.629* 4.418* 0.493* 0.339* 0.411* 0.420*
J R E R
Equity vs. MHB 5.540* 5.053* 3.705* 3.053* 0.087 0.127 0.001 0.085
0.277* 0.269* 0.327* 0.016 0.003

Vo l .
Equity 0.005 0.041* 0.009
R E I T
MHB 0.215 0.645* 0.708* 0.419* 0.075* 0.036 0.002 0.043
Equity vs. MHB 0.219 0.368* 0.439* 0.092 0.034 0.027 0.018 0.046
3 4
R e s p o n s e s
Adj. R2 0.0084 0.0061 0.0043 0.0030 0.0043 0.0045 0.0037 0.0029
Obs. 543345 590446 598284 576227 252756 267259 273277 258915

N o .
4 2 0 1 2

4 9 9
5 0 0

C h a t r a t h ,
Focus Effects: Trade-side
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Equity 26.296 13.197* 13.533* 9.141* 352.701* 276.641* 170.342* 174.161*

MHB 140.794 58.633* 43.407* 32.647* 246.728 199.722 234.220 413.072
Equity vs. MHB 167.090 45.436* 29.874* 23.506 105.973 76.919 63.878 238.911
a n d
Equity 219.175* 3.914 0.573 0.950 128.893* 28.028 21.320 65.979*
R a m c h a n d e r
MHB 81.016 15.627* 11.517* 12.207* 172.373 116.569 44.161 10.292
Equity vs. MHB 138.159 11.713 12.091* 13.157* 43.480 88.541 22.841 76.271
2
Adj. R 0.0003 0.0016 0.0022 0.0021 0.0006 0.0007 0.0004 0.0002
Obs. 543345 590446 598284 576227 252756 267259 273277 258915
P u b l i c
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Equity 0.129* 0.152* 0.130* 0.104* 0.043 0.093* 0.095* 0.038
MHB 0.403* 0.388* 0.239* 0.232* 0.201* 0.120 0.232* 0.034
J R E R
Equity vs. MHB 0.274* 0.236* 0.108* 0.128* 0.158 0.027 0.137 0.072
Vo l .
Equity 0.047* 0.014 0.009 0.001 0.005 0.009 0.013 0.031*
R E I T
MHB 0.113* 0.037 0.013 0.022 0.074 0.048 0.014 0.117*
Equity vs. MHB 0.066 0.023 0.004 0.023 0.079 0.039 0.027 0.086*
3 4
R e s p o n s e s
Adj. R2 0.0039 0.0069 0.0079 0.0073 0.0036 0.0062 0.0059 0.0060
Obs. 531490 590312 598247 576197 223198 266589 272868 258656

N o .
4 2 0 1 2

5 0 1
5 0 2

C h a t r a t h ,
Notes: In the last series of regressions we examine REIT focus by distinguishing between mortgage / hybrid REITs (MHREIT) and equity REITs (EREIT). We
employ the following regression, Yi,t 0 1EREITi,t 2MACSi,t 3REITNEWSi,t 4EREIT*MACSi,t 5EREIT*REITNEWSi,t i,t, where EREIT is
binary variable and takes a value of 1 for REITs with focus identified as equity and 0 otherwise. The other variables are as defined earlier. The intercept
represents the no-news interval for EREIT which is omitted from the regression. The interaction terms identify the differential news impact based on REIT focus
and news type and tests of restrictions (F-tests) identify the effects of focus. For brevity, we omit reporting the coefficient estimates i (1 0, 1, 2..., 5) in the
a n d
above equation and report only results of F-tests that test restrictions. Note that variances have been multiplied by a factor 103.
R a m c h a n d e r
E x h i b i t 9 REIT Size Effects: Quote-side
P u b l i c
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Equity 6.130* 5.775* 3.703* 1.469 0.389* 0.450* 0.424* 0.314*
MHB 29.852* 42.021* 32.006* 21.589* 0.206 0.179 0.191 0.218
J R E R
Equity vs. MHB 23.722* 36.247* 28.303* 20.120* 0.183 0.272 0.234 0.096
1.425* 0.361 0.364 0.089*

Vo l .
Equity 0.076 0.063* 0.059* 0.004
R E I T
MHB 1.624 3.104* 2.159* 4.233* 0.047 0.176* 0.018 0.125
Equity vs. MHB 1.701 1.680 1.798 3.870* 0.110 0.116 0.022 0.214*
3 4
R e s p o n s e s
Adj. R2 0.0037 0.0047 0.0052 0.0047 0.0004 0.0014 0.0018 0.0019
Obs. 698681 769387 772608 767108 491567 547030 552978 542417

N o .
4 2 0 1 2

5 0 3
5 0 4

C h a t r a t h ,
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Equity 4.343* 2.923* 2.207* 1.819* 5.367* 5.762* 4.864* 4.506*

MHB 2.792* 2.787* 1.199 0.745 6.733* 7.754* 7.128* 8.544*
Equity vs. MHB 1.550 0.136 1.008 1.073 1.366 1.992 2.264 4.038*
a n d
Equity 0.296* 0.238* 0.030 0.129 0.554* 0.949* 0.303 0.186
R a m c h a n d e r
MHB 0.819* 0.171 0.346 0.855* 0.361 0.933 0.721 1.681*
Equity vs. MHB 0.523 0.408 0.376 0.984* 0.915 1.882* 1.024 1.495*
2
Adj. R 0.0022 0.0026 0.0025 0.0022 0.0026 0.0021 0.0014 0.0017
Obs. 698681 769387 772608 767108 491567 547030 552978 542417
P u b l i c
BAS 0708 BAS 0203
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Equity 0.290 0.840* 0.627 0.678* 0.340 0.370 0.020 0.330

MHB 12.740* 7.960* 1.010 1.100 11.620* 4.070 8.940* 9.340*
J R E R
Equity vs. MHB 13.030* 7.120* 0.383 0.422 11.280* 3.700 8.960* 9.010*
Vo l .
Equity 0.370 0.110 0.140 0.120 0.289 0.160 0.529* 0.185
R E I T
MHB 1.730* 1.490* 2.880* 3.620* 0.641 3.510* 0.521 0.845
3 4
Equity vs. MHB 1.360 1.600* 3.020* 3.740* 0.930 3.350* 1.050 1.030
R e s p o n s e s
2
Adj. R 0.0135 0.0100 0.0110 0.0103 0.0145 0.0192 0.0206 0.0220
N o .
Obs. 698681 769387 772608 767108 491567 547030 552978 542417

4 2 0 1 2

5 0 5
5 0 6

C h a t r a t h ,
Notes: In the last series of regressions we examine REIT focus by distinguishing between mortgage / hybrid REITs (MHREIT) and equity REITs (EREIT). We
employ the following regression, Yi,t 0 1EREITi,t 2MACSi,t 3REITNEWSi,t 4EREIT*MACSi,t 5EREIT*REITNEWSi,t i,t, where EREIT is
binary variable and takes a value of 1 for REITs with focus identified as equity and 0 otherwise. The other variables are as defined earlier. The intercept
represents the no-news interval for EREIT which is omitted from the regression. The interaction terms identify the differential news impact based on REIT focus
and news type and tests of restrictions (F-tests) identify the effects of focus. For brevity, we omit reporting the coefficient estimates i (1 0, 1, 2..., 5) in the
a n d
above equation and report only results of F-tests that test restrictions. Note that variances have been multiplied by a factor 103.
R a m c h a n d e r
The type of information and the economic climate have differing effects on the
two focus categories. We also find steeper drops in trading and quoting after MACS
for mortgage/hybrid REITs than for equity REITs, thus reinforcing the notion that
the type of information and the economic climate played a large role in how these
REITs respond to information. In 0203, both categories of REITs show significant
responses to both REITNEWS and MACS, but their differences tend to be
insignificant.
Focus effects are also present in trade sizes. For instance, in 0708, following
REITNEWS, larger sizes are traded for mortgage/hybrid REITs than for equity
REITs, and sizes also fall more for mortgage/hybrid REITs following MACS.
Notice that differences between the two REITs are significant in at least two of
the four quarter-hours. However, in 0203 differences between the two REITs are
less pronounced. Depths generally rise following REITNEWS and fall following
MACS in both periods, but there appears to be sporadic evidence of differences
between the two categories.
The risk measures in 0708 show larger responses to news for mortgage/hybrid
REITs than for equity REITs. For instance, in 0708 after REITNEWS, significantly
larger reductions in price variance for mortgage/hybrid REITs are found than for
equity REITs, in all four quarter-hours.
Summary and Conclusion

We examine the role the state of the economy plays in contemporaneous
information processing in REITs, and in how REIT size, leverage, and focus affect
this process. Two important elements of public informationREIT-specific and
macroeconomicare investigated. Employing high-frequency data, the effects of
these two news elements are tracked via trade-side (number of trades, trade size,
and volatility) and quote-side variables (number of quotes, depths, and bid-ask
spreads) for 60 minutes following their releases. To investigate the role of the
economy, we cover a four-year period, from January 2002 to December 2003
(0203) and from January 2007 to December 2008 (0708). While the first period
(0203) is characterized by a rising real estate market, the second (0708) is
characterized by a notable downfall. We also frame our analysis along three
important dimensions: size, leverage and focus. This allows us to assess the
importance of each of these factors in REIT responses.
We begin the analysis with a preliminary regression that simply attempts to
establish the separate effects of REIT-specific news from macroeconomic news.
Thereafter, we conduct two sets of regressions. The first examines how REITs
respond to public information in differing economic environments while the
second examines how REIT size, leverage, and focus mediate the process of
information incorporation.
We find that public information plays a large role in the contemporaneous price
formation of REITs. REIT responses tend to be timely. For example, increases in
J R E R Vo l . 3 4 N o . 4 2 0 1 2
the levels of trading and quoting immediately follow the release of REIT-specific
public information. Generally, the effects dissipate as the length of the event
window expands. We also find that the process of news incorporation in REITs
is not uniform between REIT-specific and macroeconomic information. In fact,
their effects compete. For instance, REIT stories lead to increases in trading
activity while macroeconomic stories tend to have opposite effects. Furthermore,
responses to REIT stories are relatively more pronounced.
There is a fundamental difference in how REIT traders and specialists manage
news in rising versus falling real estate markets. A higher frequency of trading
and quoting activity follow REIT-specific news in rising markets (vis-a`-vis falling
markets), while lower frequency follow economic news. Additionally, in falling
markets, trade sizes tend to be smaller and depths lower. All of this points to
participants exhibiting greater risk-aversion in market downturns.
The findings also indicate that REIT size matters in how public information is
processed. Larger REITs appear more sensitive to information than smaller REITs
and this difference is accentuated during market downturns. In addition, leverage
effects play a larger role in information incorporation during economic downturns.
Highly leveraged REITs are more sensitive to information in these periods. We
also find that responses to information depend on a REITs focus. For example,
mortgage/hybrid REITs appear to be more sensitive to REIT stories than equity
REITs, especially during downturns in the economy.
Given the nascent literature, it is not easy to benchmark our findings. One
exception is the work on the general stock market recently undertaken by Christie-
David, Lee, and Moore (2010). We compare our findings with theirs, but restrict
this comparison to the first quarter-hour, as this is where most of the trading
(action) occurs. They conduct tests similar to our preliminary regressions (where
we establish the separate effects of REIT-specific news from macroeconomic
news).26 The estimates on the trade-side are consistently larger for the general
stock market vis-a`-vis the REIT market. This difference likely reflects the
characteristics of REITs, in that they are more defensive in nature and are less
susceptible than non-REIT stocks to market-wide disturbances (e.g., Glascock,
Michayluk, and Neuhauser, 2004; Lin and Yung, 2006; among others). We also
conduct introductory tests on a sample of positive and negative news stories for
both periods (0203 and 0708). Our findings show that negative news has larger
effects than positive news, particularly for stories that are firm-specific. We leave
this examination for further research.
Endnotes
1
REIT-specific information, defined as public information about the sampled REITs, is
gathered mainly from the newswires. Macroeconomic information consists of public
information about the economy and is obtained from Briefing.com. Briefing compiles
the information from various governmental agencies such as the Bureau of Labor
Statistics (BLS). Most microstructure analyses follow the assumption that signals from
public information are observed by all market participants (whereas signals from private
information are available only to informed traders).
2
The examination of the impact of news announcements on REITs is not without
precedence, although all employ longer-frequency data. For instance, Simpson,
Ramchander, and Webb (2007) find that REITs respond to both increases and decreases
in inflation. Ooi, Wang, and Webb (2009) find a significant positive relationship between
idiosyncratic volatility and cross-sectional REIT returns, and conclude that firm-specific
risk matters. That firm-specific information may be important is also supported by
Downs, Guner, Hartzell, and Torres (2001). They find market commentaries that relate
to publicly traded real estate assets impact REIT prices.
3
Evidence of low (and declining) REIT correlations (monthly REIT total returns) with
other types of investments are noted below. Source: www.nareit.com/portfolio/
05novdec/reit.shtml.
Other Investments 19721984 19851994 19952004
Large Stocks 0.63 0.61 0.27

Small Stocks 0.72 0.71 0.35
International Stocks 0.44 0.32 0.29
4
Related to this issue, Feng, Ghosh, and Sirmans (2007) uncover evidence that REIT
borrowing follows a clear pecking-order (first retained earnings, then debt, and finally,
external equity).
5
Prior to these checks, standard TAQ error-detection procedures are conducted. Details
about these errors and how they should be addressed can be found in an article entitled
Introduction to TAQ by Yuxing Yan on the TAQ website of WRDS (dated October 2,
2007). We follow the authors recommendations.
6
Note that some REITs (7) either migrated to the NYSE during the sampling interval or
had considerably fewer trades on this exchange compared to the other REITs. For these
REITs we include trades and quotes from other exchanges as well.
7
The search is conducted using the FACTIVA news database. The search term carries the
company name, for example Acadia Realty. At sampling we attempt to flag duplicates.
Even with this precaution, duplications still occur, since the headings may be dissimilar
between the Dow Jones and Reuters newswires. Thus, each news item had to be read
through to ensure no duplication occurs. Also, when news items are repeated, the first
occurrence is taken as the release time.
8
The announcements used include Construction Spending, the NAPM survey (ISM
Index), Factory Orders, Hourly Earnings, Nonfarm Payrolls, Unemployment Rate,
Business Inventories, PPI, Retail Sales, Capacity Utilization, CPI, Industrial Production,
Housing Starts, Leading Indicators, the Michigan Sentiment, Durable Goods Orders, and
GDP.
9
Briefing.com provides a comprehensive listing of macroeconomic news released across
the monthly macroeconomic news cycle. They provide dates and times of each release,
an explanation about the releases, actual values (ex post), Briefing.coms forecast, a
consensus forecast, and the value of the prior release.
J R E R Vo l . 3 4 N o . 4 2 0 1 2
10
We extend announcement trading hours into the next two quarter-hours (Q5, Q6).
However, the effects are sporadic in these quarter-hours. For brevity, we do not include
these results in our reporting.
11
The NYSE closes on ten (regular) holidays. Regular holidays are calendar holidays,
known in advance, and include the following: New Years Day (January 1), Martin
Luther King, Jr. Day (January 15, or Monday) Inauguration Day (January 20, every 4th
year), Presidents Day (February 3, or Monday), Good Friday (March or April),
Memorial Day (May, last Monday), Independence Day (July 4), Labor Day (September
1, or Monday), Thanksgiving (November, 4th Thursday), and Christmas Day (December
25) (source: www.nyse.com).
12
Employing the full no-news sample, instead of a matched sample, will likely inflate the
coefficient estimates for news announced early and late in the trading day, and likely
deflate the estimates for mid-day announcements.
13
Barry and Howe (1994) note similar patterns in their news sample. They find a
substantial increase in the number of releases beginning 8:00 a.m., and the increase
persists until noon.
14
Others have also documented similar patterns (see e.g., Thomson, Olsen, and Dietrich,
1987; Barry and Howe, 1994; Mitchell and Mulherin, 1994; among others).
15
A 0.01% conventional cutoff largely mimics sample size t-statistic adjustments. Thus,
we do not report the size-adjusted statistic. To check for sample size effects, a Bayesian
framework is used. With large sizes, it is likely that the null hypothesis that a particular
coefficient is zero will be rejected using classical inference, even if the posterior odds
are even (e.g., Lindley, 1957; Connolly, 1989). Connolly shows that the appropriate
cutoff, given prior odds, is t (s x)0.5(s1 / s 1)0.5, where s is the sample size and x
is the number of parameters to be estimated (including the intercept). If the reported t-
statistic exceeds t, odds are against the null hypothesis, and it would be rejected in a
Bayesian framework. Also, in our later tests, when we report F-statistics for tests of
restrictions, we maintain the same cutoff.
16
The approach when this happens is to code the dummy variable equal to 1/k, where k
is the number of announcements in a particular one-minute news interval (e.g.,
Ederington and Lee, 1993).
17
These results are available on request.
18
The higher frequency of trading activity that we find in 0708 period lends support to
the work of Driessen and Van Hemert (2010). They show that commercial real estate
derivative contracts (CMBX) overreacted to information during the 20072008 period.
19
There is sufficient justification to include January 2007December 2008 as
representative of the recent economic downturn. For instance, Cecchetti (2008) suggests
that a complete chronology of the recent financial crisis might start in February 2007,
when several large subprime mortgage lenders started to report losses. He also notes
that a definitive trigger came in August 9, 2007 [see also, Taylor and Williams (2009).
BNP Paribas, a large French bank temporarily halted withdrawals on August 9, 2007
from three of its funds holding assets backed by U.S. subprime mortgage debt. This
lead to spikes in interest rates on term lending (e.g., one- and three-month LIBOR) and
the effects began to widen in dramatic ways. Thus, we conduct similar tests (Exhibit 3)
where the second period is now drawn from August 2007 to December 2008. The results
are qualitatively similar to the findings noted with the January 2007December 2008
sample. These results are available upon request.
20
Asset sizes at the end of the financial year (e.g., 2001) are used to categorize REITs by
size for the next calendar trading year (2002). The distribution by mean asset values (in
$ mm) are:
Size End 2001 End 2002 End 2006 End 2007
LREIT 2,988.76 3,029.85 5,468.75 6,069.59

MSREIT 1,150.23 1,197.58 2,117.63 2,355.78
SREIT 459.66 477.47 845.48 887.58
21
The use of raw variables (such as REIT size) makes the interpretation unwieldy. With
raw variables included, the framework has both binary and raw variables. Binary
variables have to be included as we seek to determine the effects of news (vs. no-news).
To account for all news effects, variation must be permitted in both the intercept and
slope function, and when they have differing signs (say one positive, and the other
negative), interpretation becomes problematic.
22
That is, LREITREITNews versus No-news SREITREITNews versus No-news is tested.
22
To proxy for leverage, we employ the ratio (DLTT/SEQ) where DLTT and SEQ represent
long-term debt and shareholder equity, respectively (definitions and values are from
Compustat). The values at the end of the year are used to categorize REITs for the next
year. The distribution by mean leverage is shown below.
Leverage 2001 2002 2006 2007
HREIT 3.65 2.98 4.79 4.19

MLREIT 1.26 1.27 1.36 1.44
LOREIT 0.56 0.50 0.48 0.58
24
A large number are equity-focused. This distribution, however, will not bias our findings,
given our matching procedure.
25
The complete sets of results are available from the authors upon request.
26
Christie-David, Lee, and Moore (2010) do not examine the effects of size, leverage, and
focus and their sample spans the period 19962001. Thus, we compare our 0203 period
findings with their results.
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The authors would like to thank Ko Wang, two anonymous reviewers, and other
readers of the manuscript for excellent suggestions that helped improve the paper. We
also acknowledge the excellent research assistance of Pran Pradhan, Sharat Valsalan,
and Savannah Short.
Arjun Chatrath, University of Portland, Portland, OR 97203 or chatrath@

up.edu.
Rohan A. Christie-David, Louisville, KY 40292 or rohan.christiedavid@louisville.edu.
Sanjay Ramchander, Ft. Collins, CO 80523-1272 or sanjay.ramchander@
business.colostate.edu.
J R E R Vo l . 3 4 N o . 4 2 0 1 2
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Public Information, REIT Responses, Size, Leverage, and Focus

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Public Information, REIT Responses, Size,

Leverage, and Focus

Abstract We evaluate real estate investment trust (REIT) responses to the

We analyze the contemporaneous processing of information in real estate

information in terms of its relevance to the company may not be as

Sampling Method, Data, and Research Design

Rs ln(Ps /Ps 1), where Ps is the transaction price at day d, hour h,

cross-confirmation) adds a high degree of robustness to the information, and we

E x h i b i t 1 Distribution of REIT News

News Effects. We estimate several regressions to identify trade- and quote-side

Yi,t 0 1REITNEWSi,t 2MACS 3D0708

E x h i b i t 3 News Effects Across Two Periods: Trade-side

Panel A: Regression estimates

Intercept 1.618* 1.745* 1.765* 1.732*

Panel B: News vs. No-news

REITNEWS / 0708 3.570* 2.723* 2.240* 1.621*

Panel C: 0708 vs. 0203

REITNEWS 3.156* 2.269* 1.828* 1.280*

Panel A: Regression estimates

Intercept 775.623* 439.711* 433.076* 437.225*

Panel B: News vs. No-news

REITNEWS / 0708 11.322 17.026 16.010 10.941

Panel C: 0708 vs. 0203

REITNEWS 354.008* 252.733* 158.924* 184.072*

Panel A: Regression estimates

Intercept 0.817* 0.677* 0.617* 0.575*

Panel B: News vs. No-news

REITNEWS / 0708 0.154* 0.172* 0.140* 0.116*

Panel C: 0708 vs. 0203

REITNEWS 0.097* 0.076* 0.032 0.084*

Panel A: Regression estimates

Intercept 3.741* 4.153* 4.261* 4.259*

Panel B: News vs. No-news

REITNEWS / 0708 8.520* 9.320* 6.515* 3.488*

Panel C: 0708 vs. 0203

REITNEWS 8.146* 8.885* 6.101* 3.174*

Panel A: Regression estimates

Intercept 13.532* 13.987* 14.786* 15.523*

Panel B: News vs. No-news

REITNEWS / 0708 4.162* 2.875* 2.063* 1.667*

Panel C: 0708 vs. 0203

REITNEWS 1.283* 3.009* 2.943* 3.127*

Panel A: Regression estimates

Intercept 10.560* 7.240* 6.520* 6.340*

Panel B: News vs. No-news

REITNEWS / 0708 1.189 1.630* 0.773 0.803

Panel C: 0708 vs. 0203

REITNEWS 0.381 0.683 0.221 0.517

Size, Leverage, and Focus Effects

In this part of the analysis we examine if news responses can be explained in

Yi,t 0 1LREITi,t 2MSREITi,t 3MACSi,t

8MSREIT*REITNEWS i,t, (2)

Trades 0708 Trades 0203

Panel A: REITNEWS vs. No-news

Panel B: MACS vs. No-news

0.035 0.456* 0.417* 0.420* 0.009

Large 0.058* 0.029 0.027

Obs. 543345 590446 598284 576227 252756 267259 273277 258915