Categorizing sentiment and its impact on REIT returns

What is it about?

This paper reexamines the impact of investor sentiment on REIT returns using direct, survey-based measures of sentiment to categorize sentiment from institutional investors and individual investors. We provide a framework in which sentiment is classified into individual and institutional investor sentiment under the assumption that investors, depending on sophistication, react differently to the same set of information and will influence REIT prices differently. We employ a methodology that uses panel regression analyses and divides our sample of REITs into size and performance categories. Our results suggest that institutional investor sentiment is positively and significantly related to REIT returns contemporaneously for multiple sample specifications. These results are consistent with high levels of institutional ownership in REITs. Results also suggest that individual investor sentiment only influences small-capitalization and low-alpha portfolios.

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