Impact of Institutional Investors on Real Estate Risk

32 Pages Posted: 18 Oct 2021

See all articles by Dragana Cvijanovic

Dragana Cvijanovic

Cornell SC Johnson College of Business

Stanimira Milcheva

University College London

Alex Van de Minne

University of Connecticut - School of Business

Date Written: October 14, 2021

Abstract

Private real estate markets have experienced significant in inflows of institutional capital over the last couple of decades. In this paper we seek to understand what are the implications of this recent development. Employing a generalized Hamiltonian Monte Carlo Bayesian procedure we find novel empirical evidence that market entry by large institutional investors predicts higher uncertainty and greater noise in real estate prices in the short and medium run, and lower longitudinal risk in the long run. Our findings point to a significant effect of institutional capital, which serves as a catalyst for structural changes in real estate market risk.

Keywords: Stochastic Volatility, Institutional Ownership, Investor Size, Real Estate Asset Volatility, Bayesian Estimation, Repeat Sales Model

JEL Classification: C11, C33, C81, G11, G14, R30

Suggested Citation

Cvijanovic, Dragana and Milcheva, Stanimira and Van de Minne, Alex, Impact of Institutional Investors on Real Estate Risk (October 14, 2021). Available at SSRN: https://ssrn.com/abstract=3942539 or http://dx.doi.org/10.2139/ssrn.3942539

Dragana Cvijanovic (Contact Author)

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

Stanimira Milcheva

University College London ( email )

1-19 Torrington Place
Bartlett School of Sustainable Construction
London, London WC1E 7HB
United Kingdom

HOME PAGE: http://www.stanimilcheva.com

Alex Van de Minne

University of Connecticut - School of Business ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

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