Institutional Ownership Volatility and Investment Behavior of REITs

Viktoriya Lantushenko () and Edward Nelling ()
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Viktoriya Lantushenko: Saint Joseph’s University
Edward Nelling: Drexel University

International Real Estate Review, 2022, vol. 25, issue 2, 161-198

Abstract: We find that the volatility of institutional ownership affects the investment behavior of real estate investment trust (REIT) managers. REITs exhibit stronger growth in real estate assets when they experience more volatility in institutional ownership. Debt is the likely source of financing these investments, whereas institutional ownership volatility does not explain for the equity issuance decisions of REITs. The effect of ownership dynamics on the investment decisions of REITs is mostly driven by institutions that hold highly diversified portfolios, which are classified as quasi-indexers and transient investors. The contribution of ownership volatility emerging from individual trading decisions of institutional stakeholders matters more than the ownership volatility of the institutional sector as a whole. Our findings suggest that REITs may cater their portfolios to the preferences of certain institutional investors.

Keywords: REITs; Institutional ownership volatility; Investment decisions (search for similar items in EconPapers)
Date: 2022
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