Journal of Real Estate Finance and Economics, 22:1, 63±80, 2001
# 2001 Kluwer Academic Publishers. Manufactured in The Netherlands.
Why Do REIT Prices Change? The Information
Content of Barron's ``The Ground Floor''
DAVID H. DOWNS
Terry College of Business, University of Georgia, Athens, GA 30602-6255, USA
Z. NURAY GU
Department of Management, Middle East Technical University, Ankara, Turkey
DAVID J. HARTZELL
Kenan-Flagler Business School, University of North Carolina, Chapel Hill, NC, USA
MICHAEL A. TORRES
Lend Lease Rosen Real Estate Securities, LLC, Berkeley, CA, USA
This article examines the information content in a series of market commentaries covering the publicly traded real
estate market. The data are constructed from REIT-speci®c announcements published in a widely disseminated
source of market commentary. The empirical methodology is designed to test whether the unexpected price
change and unexpected volume are signi®cant on the announcement day. The results demonstrate that the market
commentaries provide information that impacts prices and that investors use this information in their trading.
Additional analysis suggests that prices change more in the period following the REIT boom than during an
earlier period. This result seems somewhat puzzling given recent studies that report an increase in REIT market
Key Words: information, markets, real estate
This article examines the information content in a real estate market commentary
provides evidence on the price formation of publicly traded real estate securities. The
empirical analysis focuses on investor reaction to Barron's column ``The Ground Floor.''
The measures of investor reaction studied are price changes and volume in the days
surrounding the publication date. The information content of a real estate market
commentaryÐthat is, the commentary's ability to in¯uence market expectation and
individuals' behaviorÐis an interesting area of inquiry because the volatility of real estate
prices is an important and, sometimes, controversial topic.
The economics of information is fundamental to the understanding of real estate price
formation. The fact that real estate transactions occur in markets where information is a
scarce resource is widely acknowledged by practitioners and academicians.
At the same