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Cambridge Endowment for Research in Finance (CERF)


Project Title: Capital Expenditures and the Property Cycle: Evidence from Real Estate Investment Trusts

PI: Eva Steiner (Land Economy)

Project Period: April 2015 - February 2016

Recent research finds a disposition effect in REIT property holdings. We
propose a value-add investment strategy as an alternative explanation. The
main value-add mechanism in property investment is capital expenditure
(CAPEX). However, CAPEX is a real option whose exercise depends on its
moneyness, which is a function of the economic environment. We will
study the drivers and implications of variation in REIT CAPEX through the
property cycle to explore the empirical evidence for the proposed rational
explanation for the alleged disposition effect in REIT property holdings. Our
results may also guide practitioners in their choice of an optimal CAPEX

End of Award Report - March 2016

Project Update - August 2015