Applicability of U.S. REIT pricing factors to the western European REIT market: descriptive portfolio evidence

Abstract

This thesis investigates whether U.S. REIT pricing factors, specifically size, value, momentum, profitability, and investment, exhibit explanatory power in the Western European Real Estate Investment Trust (REIT) market. Using a descriptive, return-based portfolio-sorting methodology across 218 REITs from seven Western European countries over the 2006–2024 period, the study constructs long-short factor mimicking portfolios without relying on regression-based models. The findings reveal that size and profitability factors deliver robust, statistically significant return premia, consistent with evidence from U.S. markets. In contrast, value and momentum show weak or no significance, while the investment factor exhibits a counterintuitive negative premium, with aggressively investing REITs outperforming conservative ones. The findings highlight that some factor effects generalise across markets, while others depend heavily on institutional and regional contexts.