Institutional Property-Type Herding in Real Estate Investment Trusts

Institutional Property-Type Herding in Real Estate Investment Trusts This study examines whether institutional investors exhibit herding behavior by property type in real estate investment trusts (REITs). Our analysis of changes in institutional portfolio holdings indicates strong evidence of this behavior. We analyze the autocorrelation in aggregate institutional demand, and find that most of it is driven by institutional investors following the trades of others. This herding occurs at the property-type level, and not at the individual firm level. Although momentum trading explains a small amount of this herding, institutional property-type demand is more strongly associated with lagged demand than lagged returns. The results suggest that correlated information signals drive herding in REITs. In addition, we examine the extent to which herding in REIT property types affects price performance in the private real estate market. We find that information transmission resulting from institutional herding in REITs occurs faster in public real estate markets than in private markets. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Institutional Property-Type Herding in Real Estate Investment Trusts

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Publisher
Springer Journals
Copyright
Copyright © 2016 by Springer Science+Business Media New York
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-016-9553-4
Publisher site
See Article on Publisher Site

Abstract

This study examines whether institutional investors exhibit herding behavior by property type in real estate investment trusts (REITs). Our analysis of changes in institutional portfolio holdings indicates strong evidence of this behavior. We analyze the autocorrelation in aggregate institutional demand, and find that most of it is driven by institutional investors following the trades of others. This herding occurs at the property-type level, and not at the individual firm level. Although momentum trading explains a small amount of this herding, institutional property-type demand is more strongly associated with lagged demand than lagged returns. The results suggest that correlated information signals drive herding in REITs. In addition, we examine the extent to which herding in REIT property types affects price performance in the private real estate market. We find that information transmission resulting from institutional herding in REITs occurs faster in public real estate markets than in private markets.

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: Mar 4, 2016

References

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