The Role of Correlated Trading in Setting REIT Prices

Posted: 25 May 2010

See all articles by Kevin C.H. Chiang

Kevin C.H. Chiang

University of Vermont

Ming-Long Lee

National Yunlin University of Science and Technology

Date Written: May 25, 2010

Abstract

This study investigates the role of correlated trading by individuals in setting equity real estate investment trust (REIT) prices. Consistent with existing literature, this study finds that there is a common element in correlated trades that drives both traditional closed-end fund prices and REIT prices. Perhaps more important, we find evidence suggesting that (1) the effects of correlated trading on REIT prices are stronger for those REITs that are hypothesized to be preferred by individual investors, and (2) this linkage is stronger when the REIT market is hot and exuberant; i.e., when the average share turnover in the REIT market is high.

Keywords: REITs, correlated trading, co-movement, investor sentiment, turnover

Suggested Citation

Chiang, Kevin C.H. and Lee, Ming-Long, The Role of Correlated Trading in Setting REIT Prices (May 25, 2010). Journal of Real Estate Finance and Economics, Vol. 41, No. 3, 2010, Available at SSRN: https://ssrn.com/abstract=1615673

Kevin C.H. Chiang (Contact Author)

University of Vermont ( email )

212 Kalkin Hall
Burlington, VT 05405-0158
United States

Ming-Long Lee

National Yunlin University of Science and Technology ( email )

123, University Rd. Sec 3
Touliu, Youlin 640, Yunlin 64002
Taiwan

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