Institutional Ownership Volatility and Investment Behavior of REITs

Author

Start Page / End Page

Volume

Issue Number

Year

Publication

Viktoriya Lantushenko, Edward Nelling

161 / 198

25

2

2022

International Real Estate Review

 

Abstract

We find that the volatility of institutional ownership affects the investment behavior of real estate investment trust (REIT) managers. REITs exhibit stronger growth in real estate assets when they experience more volatility in institutional ownership. Debt is the likely source of financing these investments, whereas institutional ownership volatility does not explain for the equity issuance decisions of REITs. The effect of ownership dynamics on the investment decisions of REITs is mostly driven by institutions that hold highly diversified portfolios, which are classified as quasi-indexers and transient investors. The contribution of ownership volatility emerging from individual trading decisions of institutional stakeholders matters more than the ownership volatility of the institutional sector as a whole. Our findings suggest that REITs may cater their portfolios to the preferences of certain institutional investors.

 

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Keywords

REITs, Institutional ownership volatility, Investment decisions