An Examination of Informed Traders and the Market Microstructure of Real Estate Investment Trusts

Scott D. Below (), Joseph K. Kiely and Willard McIntosh
Additional contact information
Scott D. Below: Department of Finance East Carolina University Greenville, North Carolina 27858, http://www.business.ecu.edu/depts/FINA/
Joseph K. Kiely: Department of Finance East Carolina University Greenville, North Carolina 27858, http://www.business.ecu.edu/depts/FINA/
Willard McIntosh: Prudential Real Estate Investors 51 JFK Parkway Short Hills, New Jersey 07078, http://www.prudential.com/inst/business/prei/

Journal of Real Estate Research, 1995, vol. 10, issue 3, pages 335-361

Abstract: A significant body of research exists documenting that REITs perform differently from other types of equity securities, although the reasons for these differences are unclear. This study examines the intraday trading behavior of Real Estate Investment Trusts (REITs). Specifically, intraday REIT returns, volume, trading activity, and bid/ask spread are examined in an attempt to better understand the patterns of intraday information flow for a sample of REITs trading on the NYSE. After controlling for differences in market capitalization, share price, and institutional holdings, this paper analyzes differences between REITs and non-REITs, and between REITs that are widely held by institutions and those that are not. The results suggest that, as a group, REITs exhibit lower average volumes and number of trades than do similar non-REITs. In addition, the findings suggest that mortgage REITs trade at spreads that are wider. Surprisingly, the analysis of institutional ownership suggests that equity REITs that are widely held by institutions exhibit the largest divergence from non-REITs in terms of both intraday trading activity and volume, but at the same time trade closer to non-REITs in terms of bid/ask spread. Overall, the results of this study confirm that REITs are treated differently by investors than similar non-REITs, and the institutional ownership findings suggest that trading activity is less important as a determinant of REIT performance than is the level of institutional ownership.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 1995
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