The Liquidity Crisis, Investor Sentiment, and REIT Returns and Volatility

Daniel Huerta, Peter V. Egly and Diego Escobari

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: The real estate investment trust (REIT) industry experienced a liquidity crisis resulting from reduced access to credit commitments as banks were restoring their balance sheets during the 2007-2009 financial crisis. Employing generalized autoregressive conditional heteroscedasticity (GARCH) models we examine the impact of the liquidity crisis and investor sentiment on REIT returns and volatility over the sample period from December 2001 to February 2013. We find that the liquidity crisis negatively impacts REIT returns and helps explain increases in volatility; this finding is robust to multiple specifications. We show that investor sentiment is a significant factor in explaining the REIT return generating process with institutional sentiment playing a dominating role over individual sentiment; furthermore, institutional sentiment was the only relevant sentiment variable during liquidity crisis.

Keywords: Investor Sentiment; Liquidity Crisis; REIT returns; REIT volatility; GARCH-M (search for similar items in EconPapers)
JEL-codes: G11 G14 G23 (search for similar items in EconPapers)
Date: 2015-11-21
New Economics Papers: this item is included in nep-ban
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Related works:
Journal Article: The Liquidity Crisis, Investor Sentiment, and REIT Returns and Volatility (2016)
Working Paper: The Liquidity Crisis, Investor Sentiment, and REIT Returns and Volatility (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:123499

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