REIT Cash Flows and Stock Returns

Abstract

I examine the association between cash flow measures based on financial statements information and stock market returns of REITs. The topic is relevant for decision makers in formulating investment actions. I use cash flow measures identified by Foerster, Tsagarelis, and Wang (2017) as having significant predictive power in explaining future returns. I also use REIT specific cash flow measure, funds from operations (FFO). I do not confirm the findings of Foerster, Tsagarelis, and Wang (2017) for REITs. Results based on REIT FFO are identical to the other cash flow measures. These findings suggest that further research is necessary to establish if market environment or research design or both may be responsible for results.