Daniel Huerta

Categorizing sentiment and its impact on REIT returns

Purpose - – The purpose of this paper is to reexamine the impact of investor sentiment on real estate investment trust (REIT) returns using direct, survey-based measures of sentiment to categorize sentiment from institutional and individual investors. Design/methodology/approach - – The authors provide a framework in which sentiment is classified into individual and institutional investor sentiment under the assumption that investors, depending on sophistication, react differently to the same set of information and will influence REIT prices differently. The authors employ a methodology that uses panel regression analyses and divides the sample of REITs into size and performance portfolios. Findings - – The regression results suggest that institutional investor sentiment is positively and significantly related to REIT returns contemporaneously for multiple sample specifications. These results are consistent with high levels of institutional ownership in REITs. Results also suggest that individual investor sentiment only influences small capitalization and low- Originality/value - – The findings provide more evidence on the influence of investor sentiment on security pricing even for highly regulated sectors such as the REIT industry. Investors may use changes in sentiment as signals for portfolio rebalancing and capital allocations.

Equity Versus Asset Acquisitions in the REIT Industry

We examine the differing influences of equity and asset acquisitions in Real Estate Investment Trusts (REITs) considering the prevalence of REIT asset acquisitions as frequent and major investment decisions. We examine the impact of asset purchase announcements on market returns, operating performance, and dividend payout. Our results suggest that asset acquisitions are better for the acquiring firm than equity acquisitions. Specifically, we find that equity acquisitions result in significantly negative market reactions, where asset acquisitions do not. Both equity and asset acquisitions have a negative influence on operating performance; however, the effect is significantly less for asset acquisitions.

Do Domestic Sentiment and the Spillover of U.S. Investor Sentiment Impact Mexican Stock Market Returns

We examine the relationship between sentiment and Mexican stock market returns. Results suggest a positive dynamic relationship between rational Mexican sentiment and equity market returns. Results also reveal a spillover of US sentiment on the return-generating process of the Mexican stock market that is distinct from domestic sentiment. This effect may be attributed to close economic ties and ease of capital flows between the two countries. Additionally, we find that rational sentiment and market returns are inversely related to the Peso/US dollar exchange rate. Our findings suggest that sentiment is a significant risk factor in the Mexican stock market.