International Real Estate Review

Abstract

We have analyzed the market reaction to REIT preferred stock ratings announced by Moody's Investors Service from 1999 to 2009 that are related to four types of rating events; first time ratings, outlook changes, reviews and actual rating changes. The results suggest a significant market reaction to rating upgrades of 1.08% abnormal return, and downgrades and negative outlooks of -2.28% and -2.67% abnormal returns, respectively. Compared to the non-REIT literature, the abnormal returns are smaller in magnitude which implies a relatively smaller information asymmetry within the REIT market with diversification opportunities for global investors.