Systematic Mispricing: Evidence from Real Estate Markets

Shaun Bond (), Hui Guo and Changyu Yang
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Shaun Bond: the University of Queensland
Hui Guo: the University of Cincinnati
Changyu Yang: the University of Wisconsin

The Journal of Real Estate Finance and Economics, 2025, vol. 71, issue 3, No 3, 420-452

Abstract: Abstract Despite the extensive advancement of knowledge in the field of empirical asset pricing, little is known about how this literature applies to asset classes beyond common stocks and bonds. In this paper we apply recent developments in financial economics, which posit an important role for limited market participation and financial intermediaries, in understanding real estate returns. The risk factors motivated by these theories have significant explanatory power for the cross-section of REITs. However, this relationship is the opposite of what we expected, and the results point to a more complex set of findings that are difficult to reconcile with risk-based explanations. Our results suggest systematic mispricing of real estate assets that is heavily influenced by investor sentiment.

Keywords: Mispricing; Financial intermediaries; Limited participation; REITs (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11146-021-09883-9

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