Have U.S. Financial Institutions' Real Estate Investments Exhibited "Trend-Chasing" Behavior?

39 Pages Posted: 11 Nov 2008

See all articles by Jianping Mei

Jianping Mei

New York University (NYU) - Department of Finance

Anthony Saunders

New York University - Leonard N. Stern School of Business

Date Written: January 1995

Abstract

This paper uses real estate investment data for major groups of U.S. financial institutions--- commercial banks, thrifts and life insurance companies to evaluate their investment timing performance over the 1970-1989 period. Our finding is that real estate investments by these institutions have largely been driven by ex post or past real estate returns rather than future expected returns. This apparent â¬Strend-chasingâ¬? investment strategy---of buying high and selling low---offers an explanation for the poor performance in their real estate investments. We argue that imposing market value accounting on such institutions may actually reinforce their â¬Strend-chasingâ¬? behavior.

Suggested Citation

Mei, Jianping and Saunders, Anthony, Have U.S. Financial Institutions' Real Estate Investments Exhibited "Trend-Chasing" Behavior? (January 1995). NYU Working Paper No. FIN-94-046. Available at SSRN: https://ssrn.com/abstract=1299492

Jianping Mei (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0354 (Phone)
212-995-4221 (Fax)

Anthony Saunders

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
9-190, MEC
New York, NY 10012-1126
United States
212-998-0711 (Phone)
212-995-4220 (Fax)

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