Theses and Dissertations - UTB/UTPA

Date of Award


Document Type


Degree Name

Doctor of Philosophy (PhD)


Business Administration

First Advisor

Dr. Dave O. Jackson

Second Advisor

Dr. Cynthia Brown

Third Advisor

Dr. Thanh Ngo


Real Estate Investment Trusts (REITs) are federal tax-exempt firms originated in 1960 to allow investors participation in professionally managed real estate to attain greater portfolio diversification. Although REITs are often considered transparent and informationally efficient, extant literature suggests that investor behavioral biases impact their prices and returns. This dissertation examines the relationship between investor sentiment and REITs, contributing to the literature in the following distinct ways. First, I examine the contemporaneous and intertemporal impact of changes in sentiment on REIT returns making a distinction between sentiment derived from large institutional investors and small individual investors. Results suggest that sentiment from both groups of investors positively affect REIT industry returns contemporaneously; however, no intertemporal effect is observed. Closer examination reveals that institutional investor sentiment has a larger impact on REIT returns than does individual sentiment, consistent with significant increases in institutional ownership after 1992. Second, I study the impact of the 2008-2009 REIT liquidity crisis on REIT industry returns and volatility and the role of investor sentiment during this period of market turmoil. Results indicate that the liquidity crisis negatively impacted REIT industry returns and significantly increased volatility. Findings suggest that sentiment is a significant factor in explaining REIT returns and volatility during the crisis, however, consistently larger coefficients for institutional sentiment imply dominance over individual investor sentiment. Liquidity constraints severely affected REIT industry outlooks during the crisis which pushed investors to adjust their portfolios, affecting returns negatively and pushing volatility upward. Third, I investigate the asymmetric effect of changes in investor sentiment on REIT industry returns and volatility. Results suggest an asymmetric impact between positive and negative changes in institutional investor sentiment on REIT returns and volatility; however, no asymmetric impact is observed for individual investor sentiment. After the REIT liquidity crisis, the sentiment-REIT relationship appears to change. Post-crisis, institutional investor sentiment does impact REIT returns significantly, whereas positive changes in individual investor sentiment positively affect returns. Post-crisis volatility appears to be positively influenced only by bullish changes in institutional sentiment while significantly affected by both negative and positive shifts in individual investor sentiment.


Copyright 2013 Daniel Huerta. All Rights Reserved.

Granting Institution

University of Texas-Pan American