Why is there a Home Bias? An Analysis of US REITs Geographic Concentration

Alain Coën, Arnaud Simon and Saadallah Zaiter
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Alain Coën: Département de finance [Montréal] - UQAM - Université du Québec à Montréal = University of Québec in Montréal
Arnaud Simon: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Saadallah Zaiter: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: The aim of this paper is to shed new light on the home bias puzzle employing growth options. Using a unique property-level dataset, we show that geographically concentrated real estate investment trusts (REITs) are better able to exploit growth options than non-concentrated REITs. Our empirical results report that the beta of growth options is significantly greater than the beta of assets-in-place for REITs with higher geographic concentration. We also find evidence that growth options rather than assets-in-place seem to be an important component of geographically concentrated REITs' valuations. Overall, we suggest an explanation of the relationship between higher performance and lower geographical distance in the investment decision-making process.

Keywords: Real Estate Investment Trusts; Information Asymmetry; Growth Options; Assets-in-Place; Sociétés d'Investissement Immobilier Cotées; Asymétrie d'information; options de croissance; actifs en place (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

Published in Finance, 2021, 42 (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03335570

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