Exploring sentiment-driven trading behavior of different types of investors in London office market

Qiulin Ke and Karen Sieracki

ERES from European Real Estate Society (ERES)

Abstract: The paper investigates the sentiment-oriented trading behavior of the four types of investors in London office market, i.e. UK institutional investors, UK private investors, UK listed real estate companies/REITs and overseas investors and the factors that influence these types of investor sentiment and trading behavior. Related indices are first calculated to examine whether sentiment change of one investor type leads to changes in the sentiments of other investor types. Factors that drive the investor sentiment and trading activity of different investor types are then tested. We find that UK private investors follow a contrarian strategy to UK institutional investors and UK listed real estate companies/REITs and enter/exit the market at different points of time. UK institutional investors tend to follow the sentiment of UK listed real estate companies/REITs and overseas investors with some lags. There is no evidence that overseas investors rely upon the sentiment of UK specialized property investors in their decision-making. Another main finding is that past return is positively related to UK institutions’ trading activity, but negatively related to overseas investor’s sentiment and trading activity. When breaking down the property return into capital value growth and rental growth, UK institutional investors’ sentiment and trading activity is driven by capital value growth in the previous period and the sentiment of UK listed real estate companies/REITs is driven by rental growth of the previous period. Overseas investors and UK private investors trade against the sentiment of UK institutional investors, increasing their investment when capital value growth is slower.

Keywords: different types of investors; Investor Sentiment; London office market; trading behavior (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2018-01-01
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