IDEAS home Printed from https://ideas.repec.org/a/taf/rjerxx/v43y2021i3p335-354.html
   My bibliography  Save this article

Can the Textual Tone in REIT Financial Statements Improve the Information Environment for Commercial Real Estate Investors? An Investigation

Author

Listed:
  • Riëtte Carstens
  • Julia Freybote

Abstract

The SEC requires publicly traded REITs to discuss commercial real estate market conditions in their financial statements in order to provide REIT investors with decision-relevant information. We investigate whether the textual tone in REIT financial statements (10-K/10-Q) can be used to predict future commercial real estate returns. In our empirical investigation, we focus on forward-looking tone, i.e., tone that cannot be explained by a REIT’s past performance. We extract textual tone from quarterly REIT financial statements over the period from 2002 to 2017 by using both a generic finance dictionary and a new, REIT-specific dictionary. We then employ a regime-switching methodology to assess the informative value of forward-looking tone for commercial real estate returns in the next quarter. We find that in periods of poorly performing real estate markets the forward-looking tone in REIT financial statements predicts total returns in the next quarter. This effect is driven by capital returns and is most pronounced for apartment and retail. Our findings suggest that the tone in REIT financial statements can help improve the information environment for commercial real estate investors.

Suggested Citation

  • Riëtte Carstens & Julia Freybote, 2021. "Can the Textual Tone in REIT Financial Statements Improve the Information Environment for Commercial Real Estate Investors? An Investigation," Journal of Real Estate Research, Taylor & Francis Journals, vol. 43(3), pages 335-354, July.
    • Handle: RePEc:taf:rjerxx:v:43:y:2021:i:3:p:335-354
    DOI: 10.1080/08965803.2021.1985923
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/08965803.2021.1985923
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/08965803.2021.1985923?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:rjerxx:v:43:y:2021:i:3:p:335-354. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/rjer20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.