Executive Summary. This paper examines whether the degree of market efficiency of real estate investment trusts (REITs) was influenced when a number of them were included in the S&P 500 index. The analysis is based on the traditional variance ratio test, the non-parametric-based variance ratio test, and the multiple variance ratio test. The results confirm that the REIT market is inefficient for the sample as a whole, but exhibits a significantly strong improvement after 2001. This indicates that the market efficiency of REITs is propelled by the equity market, and an important change in time in the REIT market is observed.
Journal of Real Estate Portfolio Management 15(3), p.239-250