IDEAS home Printed from https://ideas.repec.org/a/taf/rjerxx/v43y2021i4p383-401.html
   My bibliography  Save this article

Investor Sentiment and Prepayment Hazard: The Case of Multifamily MBS Loans

Author

Listed:
  • Prashant Das
  • Julia Freybote

Abstract

Rising property prices are one explanation for higher prepayments of commercial mortgages as borrowers refinance to take out equity or sell their assets. However, prices may be driven not only by fundamentals but also investor irrationality. We investigate the informative value of investor sentiment for prepayments of loans underlying commercial mortgage-backed securities (CMBS). We employ Cox Proportional Hazard models to analyze a sample of 10,728 multifamily securitized loans for the period of 2001 to 2015. We find that, controlling for fundamentals, interest rates and loan characteristics, irrational investor sentiment can explain the exercise of the prepayment option by fixed- and floating-rate borrowers in times of increased property prices. The effect of irrational sentiment on prepayment hazard is robust to different sentiment measures as well as originator, geographic, and deal characteristics. Our findings suggest that irrational investor sentiment is a source of information for lenders and CMBS investors interested in predicting prepayments.

Suggested Citation

  • Prashant Das & Julia Freybote, 2021. "Investor Sentiment and Prepayment Hazard: The Case of Multifamily MBS Loans," Journal of Real Estate Research, Taylor & Francis Journals, vol. 43(4), pages 383-401, December.
    • Handle: RePEc:taf:rjerxx:v:43:y:2021:i:4:p:383-401
    DOI: 10.1080/08965803.2021.1986349
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/08965803.2021.1986349
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/08965803.2021.1986349?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:4:p:383-401. 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.