Health Care REIT Returns & Covid-19: A Note

Abstract

This study tests for pricing efficiency in Healthcare Real Estate Investment Trusts (REITs) surrounding the Covid-19 pandemic. Fractal analysis is used to ascertain whether any persistence or anti-persistence in returns can be observed over the “pre-Covid” and “Covid/post-Covid” periods for the 15 healthcare equity REITs included in the FTSE NAREIT US Real Estate Index. The results point to weak form efficiency during the complete sample period with some exceptions. A relative stability in Hurst exponents exists across the sub-periods for several of the REITs. However, there is evidence that many other REITs series switch from being anti-persistent to persistent, a result consistent with possible herding behavior. Some very limited evidence is found of series switching from being persistent to anti-persistent, consistent with investor overreaction for these REITs. Overall, inefficient pricing is seen in a limited number of cases, but there is a strong suggestion of a possible change like the return dynamic in the latter part of the study period associated with the pandemic.