Intra-Industry Momentum: The Case of Reits

32 Pages Posted: 24 Oct 2001

See all articles by Andy C.W. Chui

Andy C.W. Chui

Hong Kong Polytechnic University

K.C. John Wei

Hong Kong Polytechnic University

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: October 19, 2001

Abstract

Real estate investment trusts (REITs) provide a good setting to examine intra-industry momentum. The industry is relatively homogenous and well defined, and the industry experienced structural changes that allow us to test alternative explanations for the observed momentum effect. Specifically, we test predictions that relate to investor overconfidence (based on Daniel, Hirshleifer and Subrahmanyam (1998)) and the speed of information diffusion (based on Hong and Stein (1999)). The first predicts a stronger momentum effect in REITs during the post-1990 period than during the pre-1990 period due to more valuation uncertainty in the post-1990 period. The second predicts a more pronounced momentum effect in REITs during the pre-1990 period than during the post-1990 period due to the higher speed of information diffusion in the post-1990 period. Our findings tend to support the first prediction. Specifically, while we do not find a momentum effect in REITs during the pre-1990 period, we find a strong and prevalent momentum effect in REITs in the post-1990 period.

Keywords: REITs, momentum, behavioral finance

JEL Classification: G1

Suggested Citation

Chui, Andy Chun Wai and Wei, Kuo-Chiang (John) and Titman, Sheridan, Intra-Industry Momentum: The Case of Reits (October 19, 2001). Available at SSRN: https://ssrn.com/abstract=288217 or http://dx.doi.org/10.2139/ssrn.288217

Andy Chun Wai Chui (Contact Author)

Hong Kong Polytechnic University ( email )

M808, Li Ka Shing Tower
Hung Hom, Kowloon, Kowloon
Hong Kong
(852)2766 7105 (Phone)
(852)2356 9550 (Fax)

Kuo-Chiang (John) Wei

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

Sheridan Titman

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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