Hedge Funds and the US Real Estate Bubble: Evidence from NYSE Real Estate Firms

31 Pages Posted: 20 Jun 2011  

Gikas A. Hardouvelis

University of Piraeus; Centre for Economic Policy Research (CEPR)

Theodoros G. Stamatiou

Eurobank Ergasias SA - Division of Research and Forecasting; University of Piraeus - Department of Banking and Financial Management

Date Written: April 28, 2011

Abstract

The recent US Real Estate Bubble had consequences not only for the real economy but for the stock market as well. Real Estate Investment Trusts' (REITS) prices reached levels which could not be supported by their fundamentals until mid-2007. Using this observation as a starting point we examine the behavior of a sample of hedge fund managers in the REITS sector of the NYSE. Our working assumption is based on the Abreu & Brunnermeier [2003] argument that rational investors under certain conditions may not always short a bubble but instead ride it so as to gain from the price rise. Using data on Hedge Fund holdings from the 13F Filing database provided by Thomson Financial, we find that hedge funds were overloaded with REITS stocks prior to the price peak of the sector but their positions were placed in such a way that they gained from this strategy. Moreover, non-specialized hedge fund managers outperformed specialized ones.

Keywords: Hedge Funds, 13F filing, Rational Investors, Bubble, Real Estate, REITS

JEL Classification: G14, G15, G18

Suggested Citation

Hardouvelis, Gikas A. and Stamatiou, Theodoros G., Hedge Funds and the US Real Estate Bubble: Evidence from NYSE Real Estate Firms (April 28, 2011). Available at SSRN: https://ssrn.com/abstract=1455902 or http://dx.doi.org/10.2139/ssrn.1455902

Gikas A. Hardouvelis

University of Piraeus ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece
+32010 4142323 (Phone)
+3210 6724848 (Fax)

HOME PAGE: http://www.eurobank.gr

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Theodoros G. Stamatiou (Contact Author)

Eurobank Ergasias SA - Division of Research and Forecasting ( email )

Athens, 10557
Greece

University of Piraeus - Department of Banking and Financial Management ( email )

80 Karaoli & Dimitriou Str.
Piraeus, 185 34 -GR
Greece

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