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Institutional Property-Type Herding in Real Estate Investment Trusts

Author

Listed:
  • Viktoriya Lantushenko

    (Saint Joseph’s University)

  • Edward Nelling

    (LeBow College of Business, Drexel University)

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.

Suggested Citation

  • Viktoriya Lantushenko & Edward Nelling, 2017. "Institutional Property-Type Herding in Real Estate Investment Trusts," The Journal of Real Estate Finance and Economics, Springer, vol. 54(4), pages 459-481, May.
    • Handle: RePEc:kap:jrefec:v:54:y:2017:i:4:d:10.1007_s11146-016-9553-4
    DOI: 10.1007/s11146-016-9553-4
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    References listed on IDEAS

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    1. Akshita Singh & Shailendra Kumar & Utkarsh Goel & Amar Johri, 2023. "Behavioural biases in real estate investment: a literature review and future research agenda," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-17, December.

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