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Who Follows REITs?

Elizabeth Devos (), Erik Devos (), Seow Eng Ong () and Andrew C. Spieler ()
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Elizabeth Devos: Eastern Michigan University
Andrew C. Spieler: Hofstra University

Journal of Real Estate Research, 2016, vol. 38, issue 1, 129-164

Abstract: This paper provides evidence that analysts who issue recommendations for REITs are primarily associated with investment banks that are active in underwriting such as full service banks and syndicate banks. Analysts at brokerage houses and independent research houses rarely issue REIT recommendations These findings suggest that underwriting activities are an important reason for investment banks and their analysts to issue recommendations for REITs. We find that recommendations are optimistic for all types of investment banks after Regulation FD, but optimistic recommendations only hold in a univariate setting for syndicates and brokerages. When we compare recommendations for REITs and non-REITS, we find differences in the type of banks that issue the recommendations and the level of optimism. These systematic differences do not diminish over time. We explore additional characteristics that can affect recommendation optimism for REITs and find that around the time of a REIT SEO, book runners of that issue become more optimistic. These findings are consistent with a conflict of interest explanation. We further find that analysts of higher ranked investment (bulge) banks tend to be less optimistic which suggests that reputational concerns may curb some of the optimism.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 2016
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Handle: RePEc:jre:issued:v:38:n:1:2016:p:129-164