| Summary: | This paper investigates the cross-section of U.S. REIT returns from 1980 to 2022 by constructing various asset pricing factors, with a specific focus on Leverage and ICR factors. Despite observing positive long-run returns for most of the constructed long/short factors, the study finds weak evidence that these factors significantly impact the cross-section of returns over the examined period. Moreover, traditional asset pricing factors exhibit limited explanatory power for the cross-section of REIT returns, suggesting their highly idiosyncratic nature. Importantly, the paper identifies a potential link between the constructed factors and ESG scores in the post-2010 period, revealing statistically significant dispersion of ESG characteristics across REITs. This finding paves the way for future research, exploring the construction of ESG factors, their explanatory power in Fama and Macbeth (1973) regressions, and their relationship with the factors investigated in this study.
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