Institutional Property-Type Herding in Real Estate Investment Trusts

Posted: 31 Mar 2017

See all articles by Viktoriya Lantushenko

Viktoriya Lantushenko

Saint Joseph's University

Edward Nelling

Drexel University - Department of Finance

Date Written: March 30, 2017

Abstract

This study examines whether institutional investors exhibit herding behavior by property type inf real estate investment trusts (REITs). Our analysis of changes in institutional portfolio holdings indicates strong evidence of this behavior. We analyze the autocorrelation in aggregate institutional demand, and find that most of it is driven by institutional investors following the trades of others. This herding occurs at the property-type level, and not at the individual firm level. Although momentum trading explains a small amount of this herding, institutional property-type demand is more strongly associated with lagged demand than lagged returns. The results suggest that correlated information signals drive herding in REITs. In addition, we examine the extent to which herding in REIT property types affects price performance in the private real estate market. We find that information transmission resulting from institutional herding in REITs occurs faster in public real estate markets than in private markets.

Keywords: REITs; Property types; Herding; Institutional investors

Suggested Citation

Lantushenko, Viktoriya and Nelling, Edward F., Institutional Property-Type Herding in Real Estate Investment Trusts (March 30, 2017). Journal of Real Estate Finance and Economics, Vol. 54, No. 4, 2017. Available at SSRN: https://ssrn.com/abstract=2943549

Viktoriya Lantushenko

Saint Joseph's University ( email )

5600 City Avenue,
Philadelphia, PA 19131
United States

Edward F. Nelling (Contact Author)

Drexel University - Department of Finance ( email )

LeBow College of Business
Philadelphia, PA 19104
United States
215.895.2117 (Phone)
215.895.2955 (Fax)

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