Capital allocation in the REIT market in light of their characteristics

Purpose: This paper aims to evaluate the profitability of capital allocation in the U.S. REIT market, in light of selected characteristics of these entities. Design/methodology/approach: Based on selected characteristics of individual REITs listed on U.S. public capital markets, hypothetical investment portfolios were constructed, and their rates of return were subsequently estimated. The characteristics analyzed included market capitalization, length of time on the market, and past performance prior to the investment period. The study covers the years 2015-2024. To verify the statistical significance of differences in REIT portfolio returns, standard t-tests were used. Findings: The findings suggest that investors may benefit from allocating capital to REITs that: (1) have the highest market capitalization; (2) have been active in the market the longest; and (3) achieved the highest rates of return in the period preceding the investment. However, it is important to note that in most of the analyzed cases, the differences in returns between portfolios composed of REITs with extreme values of a given characteristic were not statistically significant. Research limitations/implications: The present analyses focused on selected sectors of the U.S. REIT market and a relatively short, ten-year period. Future studies could expand the scope by including other sectors, international REIT markets, or strategies based on market ratios and fundamental metrics to verify the consistency of the findings. Practical implications: The findings of this study highlight the REIT characteristics that investors should take into account when constructing investment portfolios to enhance their effectiveness Originality/value: The literature review demonstrates that the relationship between investment fund characteristics and their rates of return has been extensively examined. However, there remains a noticeable gap in the research concerning the dynamically developing U.S. REIT market in recent years. Furthermore, the research aims to assess the profitability of using selected fund characteristics as a foundation for constructing an investment strategy. Keywords: REIT, capital allocation, investment strategies. Category of the paper: Research paper.