Are REITs defensive? Evidence from the U.S.

Real estate investment trusts (REITs) are regarded as defensive assets with low risk and returns in the real world. The dynamic conditional correlations bivariate threshold GARCH (DCC-TGARCH) model is employed to test for the defensive property of REITs. The data are collected at daily intervals covering the time period from January 3, 2005 to December 31, 2009. Evidence indicates that, the betas work asymmetrically in the up and down markets as well as that the systematic risk of REITs is lower in the down market. In other words, the four types of REITs act as defensive stocks in the time period under discussion in the sense that REITs have lower downside betas when the market declines.