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REIT Share Price and NAV Deviations: Noise or Sentiment?

Author

Listed:
  • Nai Jia Lee

    (Department of Real Estate, National University of Singapore)

  • Tien Foo Sing

    (Department of Real Estate, National University of Singapore, 4 Architecture Drive, Singapore 117566.)

  • Dinh Hoang Tran

    (Department of Real Estate, National University of Singapore)

Abstract

This paper empirically tests the sentiment and ¡§noise¡¨ effects in Singapore REITs (S-REIT) over the periods from January 2005 to December 2010.Our empirical results show that trading volume is significantly and negatively correlated with price to net asset value (P/NAV) premiums in the contemporary term. However, lagged trading volume is found to have positive effects on P/NAV premiums, which imply that herd activities of uninformed investors in the last period drive up REIT stock prices. The finding supports the sentiment hypothesis, but rejects the fundamental argument on P/NAV deviations. We find that the sentiment effects are asymmetric. The sentiment effects are not observed in the ¡§hot¡¨ markets during the pre-subprime crisis periods. However, the negative relations between trading volume and P/NAV premiums disappear in the post-crisis periods in 2008.

Suggested Citation

  • Nai Jia Lee & Tien Foo Sing & Dinh Hoang Tran, 2013. "REIT Share Price and NAV Deviations: Noise or Sentiment?," International Real Estate Review, Global Social Science Institute, vol. 16(1), pages 28-47.
    • Handle: RePEc:ire:issued:v:16:n:01:2013:p:28-47
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    References listed on IDEAS

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    Cited by:

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    2. William Mingyan Cheung & James Chicheong Lei & Desmond Tsang, 2016. "Does Property Transaction Matter in the Price Discovery of Real Estate Markets?," International Real Estate Review, Global Social Science Institute, vol. 19(1), pages 27-49.
    3. Kumala, Calvin & Ye, Zhen & Zhu, Yite & Ke, Qiulin, 2024. "Why does price deviate from net asset value? The case of Singaporean infrastructure REITs," International Review of Financial Analysis, Elsevier, vol. 93(C).
    4. Chinmoy Ghosh & Mingwei Liang & Milena T Petrova, 2020. "The Effect of Fair Value Method Adoption: Evidence from Real Estate Firms in the EU," The Journal of Real Estate Finance and Economics, Springer, vol. 60(1), pages 205-237, February.

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    More about this item

    Keywords

    Net Asset Value; Noise Trading; Sentiment; Imperfect Market; and REIT;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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