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Institutional Investors and Home-Biased REITs

Author

Listed:
  • Lucia Gibilaro
  • Gianluca Mattarocci

Abstract

Real estate investment trusts (REITs) are frequently considered an investment opportunity for institutional investors due to their above-average returns with respect to other financial instruments. Due to the unique characteristics of the real estate market, geographically specialized (home-biased) REITs can normally benefit from higher-quality information for selecting investment opportunities and from a reduction of the cost of monitoring and servicing asset owners. Home-biased REITs can be particularly appealing for institutional investors because the addition of this type of asset to an already diversified investment portfolio can optimize the risk–return of their investment strategy and mitigate the concentration of real estate investments. This paper considers all the REITs in Standard & Poor’s Global REIT Index and evaluates the percentage of investment released by (domestic and foreign) institutional investors and its change over time. Focusing on REITs’ international real estate exposure, this paper shows that geographical diversification matters for investment decisions made by international investors and the results are robust with respect to the time horizon and the proxy for ownership concentration.

Suggested Citation

  • Lucia Gibilaro & Gianluca Mattarocci, 2021. "Institutional Investors and Home-Biased REITs," Journal of Real Estate Portfolio Management, Taylor & Francis Journals, vol. 27(2), pages 104-120, July.
    • Handle: RePEc:taf:repmxx:v:27:y:2021:i:2:p:104-120
    DOI: 10.1080/10835547.2021.1986347
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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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