Vivek Sah

Experience and real estate investment decision-making: a process-tracing investigation

This study investigates the impact of experience upon trained behaviours in real estate investment decision‐making. In a controlled experiment design, two groups of subjects, experts and novices, conduct an evaluation and reach a decision about two investment options. Using a process‐tracing technique, each subject’s behaviour is observed and recorded. Differences between the groups are discovered in relation to some behaviour characteristics, but experience appears not to impact all behaviours. These findings are discussed in relation to the current absence of a universal normative model of real estate investment decision‐making. In an associated component of the study, the belief that monetary compensation is needed in order to render valid results from studies such as this is tested. We find this not to be the case.

Asset acquisition criteria: A process tracing investigation into real estate investment decision making

Purpose – The purpose of this paper is to observe the decision‐making behavior of real estate investors, both novice and experts. In doing so, the study looks at the information content of the decision‐making process of these players involved in real estate investments.Design/methodology/approach – The paper uses a controlled experiment to directly observe the decision‐making process of the two group of investors (novices and experts) used in this study.Findings – The findings give us an insight on the type of data utilized by the two groups. Experts frequency of cue utilization was greater in all cues except two. In four cues in particular, underwriters analysis of stabilized cash flow, loan summary, Phase I and environmental reports and current rent roll the experts frequency was twice that of novices. This suggests that experience may sensitize experts to the importance of some attributes of real estate overlooked by novices. This study also finds evidence of order of presentation of cues influencin...

IPO market timing: evidence from the operating performance of REITs

Purpose - The purpose of this paper is to consider the operating performance of real estate investment trust initial public offerings (REIT IPOs) as a measure to find additional evidence of market timing in this sector. Design/methodology/approach - A sample of REIT IPOs is analyzed to determine the relationship between IPO clustering and several measures of REIT operating performance. Findings - The results suggest that timing the market by marginal firms in the REIT sector would be difficult, due to the transparent nature of REITs, leading to lower level of informational asymmetry between REIT managers and investors. Consistent with results found for non-REIT firms in industry clusters, no evidence was found of a significant difference between the operating performance of REITs which are part of an IPO cluster and those that went public outside of the identified cluster periods. Practical implications - This study shows that REIT market is efficient and would not allow REIT managers to time the market. Originality/value - Using stringent measures of identifying REIT IPO clusters and operating performance as a measure to gauge market timing, this study differs from previous studies and provides additional and robust evidence of transparent nature of REITs that leads to reduced information asymmetry between managers and investors. This result supports the theory that REITs are more transparent and thus less likely to be over-invested during IPO cluster periods.

Does index addition add any new information? Evidence from REIT dividend forecasts

The information-free event hypothesis associated with index additions has been very well documented in the finance literature. Most studies confirm that index addition conveys positive information about the future prospect of firms recently added to an index. However, this may not be the case for REITs, which are considered to have higher informational efficiency due to the transparent nature of their balance sheet. Using a sample of 108 additions to the S&P REIT Index over a period of 2000–2011, we test this hypothesis using analyst dividend forecasts. Our results are different from those found by similar studies in finance for non-REIT stocks. In most of the cases and consistent with our a priori expectations, the findings suggest that index addition announcement may not reveal much information beyond what is available from a REIT’s balance sheet. Specifically, our results suggest different responses of the analysts to the index announcement depending upon the type of revision to the dividend forecast. For positive revised estimates, the announcement does not seem to add any new information to the analysts. However, for the two other scenarios, i.e. negative revised estimates and no revision to the estimates, the results show some evidence of information bias. Thus, we see an asymmetric response depending on the type of revision made by the analyst. However, when we look at the longer time horizon between the forecasts, we find no influence of the index addition news for any of the cases analysed. Further, our results are robust to using EPS as a measure of analyst forecast as well.

Elective stock dividend in REITs: market reaction and determinants

Purpose - The purpose of this study is to look at the market reaction to stock dividend announcements of real estate investment trusts (REITs) and further look at their determinants. Design/methodology/approach - The paper uses standard event methodology for market reaction to determine abnormal returns and CARs. Additionally the paper uses a logistic regression to analyze determinants. Findings - Using a sample of 37 announcements from fourth quarter 2008 till first quarter 2010, the paper finds a mean negative abnormal return of -1.23 percent on the day of the announcement. Further, following the announcement day, the paper finds a weak significant positive abnormal return on the day after that (+1), which may convey some optimism from the investors. Further, when the paper looks at the characteristics of such REITs, it finds that REITs with higher leverage ratio and larger asset bases are more likely to issue stock dividend. Additionally, the results also indicate that the stock dividend announcement lead to an abnormal turnover of 0.24 percent for these REITs on the day following the announcement. This may suggest an increase in the marketability of the stock dividend REITs after the announcement date. Practical implications - First, the reaction of the market will help gauge the response of investors to such announcements. This could provide REIT managers information on ex-ante investor reaction to such dividend decisions. Second, this study will help identify the characteristics of REITs that declare stock dividends. For investors who rely on market trading information, study in this regard will help them to build up their portfolios. Originality/value - This is the only study that looks exclusively at stock dividends in REITs and the second study to look at stock dividends in REITs in general. It is different from the other study in this field because of its methodology, sample size and some distinct results.

Housing Preferences of Asian and Hispanic/Latino Immigrants in the United States: A Melting Pot or Salad Bowl

Several factors affecting household formations of first‐ and second‐generation Asian and Hispanic/Latino immigrants are identified, including contextual social interaction effects. Using household data from the American Housing Survey and Public Use Micro‐data Sample, we find that first‐generation Asian and Hispanic/Latino immigrants are more likely to live in coresidence households; and this is influenced by immigrant gender, age, education, income, employment and density. Education and income are inversely related to coresiding, while higher immigrant density increases the propensity to coreside. Contextual effects reveal that neighborhoods with a relatively large Caucasian average household size increase coresidence behavior among immigrants; and the income of Caucasians living in the area is inversely related to immigrant coresiding behavior. Second‐generation Asian immigrants are more likely to live independently, while second‐generation Hispanic/Latino immigrants have a higher propensity to coreside; however, they are influenced contextually by geographic household and income patterns. We further specify findings by considering local housing price, the fusion of immigrants in the United States, agglomeration of immigrants in central city and a comparison between immigrants in United States and similarly aged natives in China. Our results are robust to potential sample‐selection bias and social interaction boundary selection bias.

The predictive abilities and persistence of Morningstar ratings: an examination of real estate mutual funds

This study examines the predictive abilities of Morningstar ratings with respect to the future relative performance of real estate mutual funds. It also looks at the persistence of the rating system. Morningstar ratings and real estate mutual fund returns are analysed over the five-year period 2003 to 2007. The measures of future performance are raw returns and two Jensen’s alpha models. We find some weak evidence that Morningstar predicts the relative performance of real estate mutual funds when measured as raw returns. However, when returns are adjusted using the Fama–French three-factor model with momentum, we find no evidence that Morningstar ratings provide reliable guidance regarding future real estate mutual fund performance.