One of the most controversial topics in modem financial economics is "excess volatility:" the notion that stock prices move too much to be explained by fundamental economic and firm-specific factors. This article measures the degree of excess volatility in a special class of equities: real estate investment trusts (REITs). The structure of REITs, specifically, the constraints on dividend payout, the passive approach to asset management and the detailed data available on REIT composition, make them ideal for this investigation. The tests are conducted using the Shiller-West variance bounds methodology and by estimating the volatility of the underlying assets. We find that despite the absence of dividend smoothing behavior, REITs exhibit approximately the same level of excess volatility as determined in previous work in equities. This finding of excess volatility is confirmed in the second part of our analysis and confirms that dividend smoothing cannot explain excess volatility. Furthermore, it suggests that prices of securitized real estate vehicles like REITs follow a stochastic process that is very different from the process driving the underlying real assets.