REIT Institutional Ownership Dynamics and the Financial Crisis
Posted: 22 Aug 2013
Date Written: August 21, 2013
Collectively, institutional investors hold large ownership stakes in REITs. The traditional view is that institutions are both long-term and passive investors. The financial crisis beginning in 2007 provides an opportunity to analyze the investment choices of institutional investors before, during, and after the crisis. Our results indicate that institutional ownership increased prior to the financial crisis, decline significantly during the period of market stress, but rebounded after. These results hold for four institutional investor subtypes: mutual funds/investment advisors, bank trusts, insurance companies, and other institutions, with mutual funds/investment advisors and bank trusts most clearly exhibiting this pattern. We also find evidence that institutions actively manage their REIT portfolios, displaying a "light to quality" after he market downturn by reducing beta and individual risk exposure, and by increasing ownership in larger REITs.
Keywords: REITs, Institutional ownership, Financial crisis
JEL Classification: G32, G34
Suggested Citation: Suggested Citation