Eres : Digital Library : Works

Paper eres2011_253:
The Impact of Noise Trading on NAV Spreads in REIT Pricing

id eres2011_253
authors Mueller, Michael G
year 2011
title The Impact of Noise Trading on NAV Spreads in REIT Pricing
source 18th Annual European Real Estate Society Conference in Eindhoven, the Netherlands
summary According to the US-American standard, various countries throughout the world introduced a national Real Estate Investment Trust (REIT) Regime in the last decade. Likewise eleven member states of the European Union (EU) established the legal conditions for REITs and approximately 115 REITs have been founded within the EU since. With this rise of REITs, European analysts and investors are confronted with a puzzling phenomenon regarding the pricing of REIT shares as well: a time-varying spread between market capitalization and fundamental value (determined by net asset value/NAV). Previous research has revealed two different assertions to these premiums/discounts, generally referred to as the rational and the irrational approach. While the first is concerned with the effect of company-specific factors (e. g. size, leverage, focus) on the valuation of REITs, the latter adapts an approach from behavioral finance and assumes NAV-Spreads as a result of noise trading. Since the initial attempt to apply the noise trader hypothesis on this phenomenon, the growing international research on REITs has delivered several new insights regarding different aspects of the approach. We give a broad survey on the related results and incorporate recent adjustments to theory from aligned fields of research. We aim to achieve a more generalized view concerning the impact of noise trading on NAV spreads in REIT pricing.
keywords thaireits, nav, spread, premium, discount, behavioral finance, noise trading
series ERES:conference
email michael.mueller@bwl.tu-darmstadt.de
content file.pptx (390,798 bytes)
discussion No discussions. Post discussion ...
ratings Ratings: 5 5 5
session B3: Real Estate Education (II)
last changed 2011/06/23 16:27
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