Changes in sentiment on REIT industry excess returns and volatility

Authors

Daniel Huerta-Sanchez
Diego Escobari, The University of Texas Rio Grande ValleyFollow

Document Type

Article

Publication Date

8-2018

Abstract

REIT characteristics pose unique risks and benefits to investors who seek liquid diversification and hedging vehicles to complement their portfolios. This paper tests for the asymmetric effect of individual and institutional investor sentiment on REIT industry returns and conditional volatility. We simultaneously model the impact of two markedly different groups of investors on the return generating process of the REIT industry. Our findings suggest that noise trading imposes significant systemic risk on the realization of REIT industry returns. Interestingly, corrections in institutional investor expectations have a larger effect on REIT industry returns and volatility than changes in individual investor expectations. More specifically, bearish shifts in institutional investor expectations of future market conditions have a significantly larger impact on returns and volatility than bullish shifts. Results align with the overreaction to negative information and loss aversion hypotheses.

Comments

Original published version available at https://doi.org/10.1007/s11408-018-0312-9

Post-prints are subject to Springer Nature re-use terms

https://rdcu.be/c3DWB

Recommended Citation

Huerta-Sanchez, D., Escobari, D. Changes in sentiment on REIT industry excess returns and volatility. Financ Mark Portf Manag 32, 239–274 (2018). https://doi.org/10.1007/s11408-018-0312-9

Publication Title

Financial Markets and Portfolio Management

DOI

10.1007/s11408-018-0312-9