Comovement After Joining an Index: Spillovers of Nonfundamental Effects

Real Estate Economics (Impact Factor: 1.02). 03/2007; 35(1):57-90. DOI: 10.1111/j.1540-6229.2007.00182.x
Source: RePEc


This study considers the case of two overlapping categories in the context of recent category models. Specifically, we examine whether investor sentiment and market frictions specific to one category can affect the returns on assets belonging to the other category. With recent additions of several real estate investment trusts (REITs) into general stock market indices as a natural experiment, we find support for spillovers of such nonfundamental effects, as evidenced by the increased return correlation between REITs that remain outside the index and the index stocks. Further analysis reveals that market frictions play a greater role than investor sentiment. Copyright 2007 American Real Estate and Urban Economics Association

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    • "Glascock et al., 2000, Clayton & MacKinnon, 2001 and Case et al., 2010) and the nature of REIT systematic risk (e.g. Crain et al., 2000, Feng et al, 2006, Ambrose et al., 2007). "
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    Journal of Real Estate Portfolio Management 01/2006; 12(1).
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