We study the sensitivity of CEO compensation to luck using real estate prices to differentiate changes in compensation due to pure luck from changes in compensation due to reactions to lucky events. We find that that pay for luck is explained mostly by reactions to lucky events rather than pure luck. Our identification relies on the fact that changes in real estate prices affect market performance irrespective of managerial actions, while accounting performance is only affected if the manager reacts to the shock. In addition, our findings suggest that firms anticipate pay for luck and offer less equity-based compensation to CEOs that are more exposed to the real estate market. Interestingly, our results are not explained by corporate governance. Our results are consistent with the contracting view that CEOs are not rewarded for pure luck.