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The Continuing Overreaction in the REIT Market

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  • Ming-Yu Liu

    (National Taiwan University)

  • Chiuling Lu

    (National Taiwan University)

Abstract

We find that REITs, which are most held by institutional investors and are characterized as being passive investment instruments, exhibit price continuing overreaction. The empirical results show that buying REITs with an upward continuing overreaction and shorting REITs with a downward continuing overreaction yields a significant positive return, and that the return patterns reverse in the long run. We further find that the continuing overreaction comes from the trading of active mutual funds, suggesting that active fund managers exhibit the biases of overconfidence and self-attribution. Finally, we show that market continuation and high information uncertainty amplify the degree of continuing overreaction.

Suggested Citation

  • Ming-Yu Liu & Chiuling Lu, 2020. "The Continuing Overreaction in the REIT Market," The Journal of Real Estate Finance and Economics, Springer, vol. 61(1), pages 129-149, June.
    • Handle: RePEc:kap:jrefec:v:61:y:2020:i:1:d:10.1007_s11146-019-09707-x
    DOI: 10.1007/s11146-019-09707-x
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    References listed on IDEAS

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    2. Cao, Jie & Han, Bing & Song, Linjia & Zhan, Xintong, 2023. "Option price implied information and REIT returns," Journal of Empirical Finance, Elsevier, vol. 71(C), pages 13-28.

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