Which Sentiment Indicators Matter? An Analysis of the European Commercial Real Estate Market

Steffen Heinig (), Anupam Nanda () and Sotiris Tsolacos ()
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Steffen Heinig: Henley Business School, University of Reading
Anupam Nanda: Henley Business School, University of Reading
Sotiris Tsolacos: Henley Business School, University of Reading

ICMA Centre Discussion Papers in Finance from Henley Business School, University of Reading

Abstract: Property markets exhibit several classic market inefficiencies, which can lead to irrational behaviour and a better understanding of connections between yield modeling and the role of sentiment is of immense interest to property funds, pension funds, banks, insurance companies and other participants. While past studies have examined the role of sentiment in market performance, the conclusions have remained mixed. This paper compares established models against two new innovative methods, paying more attention towards the expectations of market participants to explain yield adjustments and swings in property values. Forecast evaluations reveal that models incorporating property-specific and google trend sentiment outperform the base model. The European market offers an interesting testing ground for our research questions as the interest of investors and banks in abrupt movements in yields and pricing and the role of market sentiment has grown in Europe post global financial crisis due to high level of nonperforming loans.

Keywords: yield modelling; property lending; sentiment (search for similar items in EconPapers)
JEL-codes: C53 C82 E37 R31 (search for similar items in EconPapers)
Date: 2016-06
New Economics Papers: this item is included in nep-mac
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