Spread Too Thin: REIT Asset Dispersion and Divergence of Opinion

Mariya Letdin (), C. Stace Sirmans () and G. Stacy Sirmans ()
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Mariya Letdin: Florida State University
C. Stace Sirmans: Auburn University
G. Stacy Sirmans: Florida State University

The Journal of Real Estate Finance and Economics, 2024, vol. 69, issue 2, No 1, 227 pages

Abstract: Abstract In this paper we explore the drivers and implications of divergence in investor opinion of firm value. We use dispersion in analyst estimates of Net Asset Value in REITs as a measure of divergence. We find that divergence in opinion of value is positively associated with portfolio geographic diversity, the presence of international buildings, and firm leverage. Portfolio concentration in tertiary versus gateway markets has no effect on dispersion of value estimates. We find that greater divergence in analyst opinion of value predicts lower stock returns and higher return volatility. Consistent with theoretical predictions from Miller (1977), we find that firms for which investors have the highest disagreement on valuation, pessimistic views of investors are not fully incorporated into prices, resulting in lower future returns.

Keywords: Investor beliefs; REITs; Geographic dispersion (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11146-022-09920-1

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