A Behavioral Interpretation of the NAV Discount Puzzle in Listed Real Estate Companies (Version Aug 2017)

21 Pages Posted: 24 May 2018

See all articles by Sally Monson

Sally Monson

University of Cambridge

Helen X. H. Bao

University of Cambridge - Department of Land Economy

Colin Lizieri

University of Cambridge - Department of Land Economy

Date Written: August 31, 2017

Abstract

The NAV discount is a long standing puzzle in the listed real estate context. In this paper we extend the existing literature’s rational and noise trader explanations by exploring the influence of specific irrational behaviors. Based on behavioral biases identified in the stock and real estate markets, we hypothesize the existence of a relationship between lagged NAV growth and the NAV discount. The findings provide initial evidence of trend-chasing behavior between the dual real estate markets. The results have broader implications for the perception of the relationship between public and private real estate markets.

Keywords: Judgemental Bias, Behavioural Economics, Noise Trader, Overreaction

JEL Classification: G11, G15

Suggested Citation

Monson, Sally and Bao, Helen X. H. and Lizieri, Colin M., A Behavioral Interpretation of the NAV Discount Puzzle in Listed Real Estate Companies (Version Aug 2017) (August 31, 2017). Available at SSRN: https://ssrn.com/abstract=3177790 or http://dx.doi.org/10.2139/ssrn.3177790

Sally Monson

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

Helen X. H. Bao (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

Colin M. Lizieri

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

HOME PAGE: http://www.landecon.cam.ac.uk/staff/profiles/clizieri.htm

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