EconPapers    
Economics at your fingertips  
 

New Insights into the NAV Spread Puzzle of Listed Real Estate: Idiosyncratic and Systematic Evidence

Christian Weis, René-Ojas Woltering and Steffen Sebastian

ERES from European Real Estate Society (ERES)

Abstract: This paper presents novel insights into the NAV spread puzzle of listed real estate. We find 1) that increasing company size reduces NAV discounts and increases NAV premiums which can be explained by economies of scale and the popularity of large stocks among investors. 2) Increasing company-specific risk increases the discount as risk of potential default decreases attractiveness among investors. Contrary to existing research, rising leverage reduces the discount and increases the NAV premium accordingly, which can be explained by a potential positive leverage effect on the return on equity. 3) Long-term credit market indicators help to explain the NAV spread puzzle: An increase in the default spread, increases the discount and decreases the premium. However, the results for the short-term credit market indicator term spread do not help to solve the NAV spread puzzle. 4) Increasing positive stock market and property sector sentiment reduces NAV discounts as was found by past research accordingly and is in line with the noise trader theory. The analysis is based on monthly data over the 2005-2014 period for a global sample of 447 listed real estate companies (REITs and REOCs) in 12 countries. This rich setting offers substantial heterogeneity in NAV spreads, idiosyncratic and systematic factors across time and countries.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2018-01-01
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://eres.architexturez.net/doc/oai-eres-id-eres2018-224 (text/html)
https://eres.architexturez.net/system/files/P_20180131160714_1559.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2018_224

Access Statistics for this paper

More papers in ERES from European Real Estate Society (ERES) Contact information at EDIRC.
Bibliographic data for series maintained by Architexturez Imprints ().

 
Page updated 2019-12-08
Handle: RePEc:arz:wpaper:eres2018_224