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Whether geographic diversification within property portfolios is ideal remains an open question, with most studies finding either a diversification discount or no evidence of benefits. Using a sample of equity real estate investment trusts (REITs) from 2010–2016, we find a nonlinear relation between geographic diversification and firm value. Specifically, geographic diversification is associated with higher REIT values for firms that can be described as being more transparent (i.e., they have high levels of institutional ownership or invest in core property types.) Whereas, geographic concentration is associated with higher REIT values for firms that can be described as being less transparent (i.e., they have low levels of institutional ownership or invest in non-core property types.) Operating efficiency, at both the property- and firm-levels, are the means by which the diversification value is realized. Operations improve as property portfolios become more geographically diversified for more transparent firms. When the improvements are decomposed into revenue generation and expense efficiency portions, we find revenue generation to be the main operational channel through which the benefits are obtained.

Sovereign Wealth Funds (SWFs) are an institutional investor class about which relatively little is known. Even though they have trillions of dollars in assets under management, their (typically) highly secretive nature renders them difficult to analyze in an academic context. We utilize transactional data from the Sovereign Wealth Fund Institute to provide the first academic analysis of SWF real estate investment activity of which we are aware. To better understand this growing investor class, we compare SWFs with their most closely related institutional group, public pension funds (PPFs). While both SWFs and PPFs are state owned investment funds, we find SWFs have lower Stone and Truman (2016) best practice scores (based on fund structure, governance, transparency and accountability, and behavior.) Further, while both SWFs and PPFs show increasing levels of cross-border real estate investment, SWFs are significantly more likely than PPFs to invest across international borders. We find the percentage of SWF cross-border real estate investment to be substantially higher than the percentage of SWF cross-border investment in public and private equity documented in other studies. Moreover, in a subsample of acquisitions in the U.S., cross-border real estate investments are in locations with lower capitalization rates than domestic acquisitions for both SWFs and PPFs, and there is no discernable difference in rates across the two fund types, on average.

The foreign direct investment (FDI) literature documents that higher quality governance, at both the national level and the firm level, is associated with a greater likelihood to invest abroad and ...

We investigate market reactions to manager and analyst tones during earnings conference calls using company transcripts from the Stock Exchange of Hong Kong (SEHK). This is the first study to examine the role of conference call tones outside of a US setting. Consistent with previous US-based results, we find that positive tones lead to higher stock returns. In contrast to US-based results, we show that investors place more emphasis on managerial tones than on analyst tones. We also find that stock market reactions to conference call tones are stronger for firms with a sophisticated investor base.

Using a sample of CCIM designees and candidates in an experimental setting, this study examines the impact of broker signaling in commercial real estate transactions. It also explores the effect of certainty of closure in commercial real estate transactions. Findings suggest brokers are able to influence transaction pricing. Moreover, detailed analysis reveals that when a signal is above a reference point implied by previous transactions, the strength of the signal matters; privately communicated signals from reliable sources have significantly greater impact than signals which are made widely available. Additionally, we find an approximately 10% premium in transactions with lower certainty of closure than one with high certainty. The latter result varies by transactional participant type; owner/developers require a larger premium than institutional sellers.

We examine the impact of conference call tones on the direction and magnitude of subsequent manager trades. Our univariate results show that corporate insiders buy company shares following negative-tone conference calls and sell shares following positive-tone conference calls. This inverse call tone–trading pattern holds for both managers’ introductory sessions and subsequent question-and-answer (Q&A) sessions. Our multivariate results confirm the univariate call tone–trading patterns and show that contrarian manager trades are mostly driven by managerial selling activity. In contrast to the consistent and strong evidence of managers trading in the opposite direction of their call tones, we find no evidence of managers trading in the same direction of their call tones. We also examine the impact of analyst Q&A challenges on post-call manager trades. Our findings suggest that managers learn from analyst feedback and adjust their post-call trades accordingly.

We develop a model for valuing U.S. real estate investment trusts (REITs) that considers the tax liability impounded in REITs’ property portfolios. This liability is a function of the portfolio’s accumulated depreciation and is driven by different tax rates applied to individual components of the total gain from property sales. These two components are the capital gain resulting from the sale of property at a price higher than its cost and the gain due to the recapture of depreciation taken during the use of the property. Our measure of value is the REIT’s net asset liquidation value (NALV). The metric of REIT value currently used by analysts is a REIT’s net asset value (NAV), but a REIT’s NAV will always be greater than the NALV and therefore overestimate market value, all else equal. Finally, using observed market prices for REITs, we provide evidence that NALVs give superior estimates of REIT market prices than do NAVs.

Recent research finds that investors, broadly defined, react to the linguistic tone of quarterly earnings conference calls; there is a positive relation between firms' stock returns and call tone (a measure of “sentiment” related word tabulations). However, this type of soft information can be subtle, context-specific, and difficult to interpret. Moreover, the literature suggests cross-sectional variation in information processing skills among investors. Thus, we test whether sophisticated investors interpret earnings conference call tone differently than investors at large by examining short selling activity and its relation to earnings conference call tone. We find that short sellers target firms with simultaneous high earnings surprise and abnormally high management tone. The combination of positive earnings surprise and unusually positive tone strengthens short sellers' return predictability. This result indicates that short sellers interpret revealed “inflated” call language by managers more completely than naive investors. The incomplete stock price reaction by naive investors due to the lack of reliability that they place on this soft information results in overpricing of the stock. However, it also suggests that managers are unable to maintain prolonged overvaluation of their stock by striking an overly optimistic posture in the interactive conference call disclosure forum since short sellers' trades provide additional price discovery.

Quarterly earnings conference calls convey fundamental information as well as manager and analyst opinion about the firm. This study examines how the market’s uncertainty regarding firm valuation is affected by the abnormal content of earnings conference calls. Using textual analysis of all publicly available conference call transcripts, we find that measures of abnormally negative conference call tones are positively related to measures of firm value uncertainty from the equity options market. Overall, value uncertainty is more sensitive to analyst tones than management tones, consistent with analysts’ role as information intermediaries and active shareholder monitoring. Additionally, abnormal differences between analyst and manager tones in the conference call discussion section are strongly associated with increases in value uncertainty.

We study the relations between governance mechanisms (internal and external), conference call voluntary disclosures (incidence and length), and CEO compensation using hand-collected data on conference calls, corporate governance, and compensation. We hypothesize and show that institutions push for more frequent and longer conference calls in order to obtain more information with which to evaluate their investment. While independent directors push to hold conference calls, they may also prefer to have shorter conference calls to avoid potential lawsuits, proprietary costs, and/or loss of reputation that can arise from releasing too much information. Entrenched executives seek to minimize risk (such as employment and/or litigation risk) by limiting the length of conference calls or by avoiding conference calls altogether. In addition, contrary to recently proposed hypotheses, we find that executives do not receive additional compensation for bearing the risks of holding voluntary conference calls.

We examine the pricing of volatility risk in the cross-section of equity real estate investment trust (REIT) stock returns over the 1996 to 2010 period. We consider both aggregate (systematic) volatility and firm-specific (idiosyncratic) volatility. In contrast to the negative and significant price of systematic volatility risk for non-REIT equities, we find that systematic volatility is not priced in REIT returns. Idiosyncratic volatility, estimated using the Fama and French (1993) three-factor model, is negatively priced in the cross-section and is largely independent of non-REIT idiosyncratic volatility. Within the total volatility risk profile, idiosyncratic volatility dominates aggregate volatility in REIT pricing.

We examine the investor reaction to emotionally charged information. Using audio files of quarterly earnings conference calls and specialized Layered Voice Analysis software, we isolate the emotional content of managers’ vocal cues. With results that are both statistically and economically significant, we find that executive emotion is positively related to investors’ initial reaction. Moreover, this strong investor reaction to emotional signals by REIT managers appears to be justified, suggesting that credible, value-relevant information is contained in the emotion related signals. However, we also find some limited evidence of a partial reversal in subsequent trading windows, suggesting that investors may second guess themselves or fear they overreacted.

The international business literature documents that higher quality corporate governance, at both the national level and the firm level, is associated with a greater likelihood to invest abroad and to take larger stakes when investing abroad. We examine a unique set of international real estate holdings and corporate governance data to evaluate the comparability of real estate investment to foreign direct investment (FDI) more broadly. Our results at both the national and firm level indicate that real estate transactions differ fundamentally from other types of FDI. Specifically, property nation governance, real estate firm headquarter nation governance, and firm level governance are negatively associated with the propensity to invest across borders. Further, firm level corporate governance is negatively related to the stake acquired in foreign property investment. These results are counter to the FDI literature.

Quarterly earnings conference calls are becoming a more pervasive tool for corporate disclosure. However, the extent to which the market embeds information contained in the tone (i.e. sentiment) of conference call wording is unknown. Using computer aided content analysis, we examine the incremental informativeness of quarterly earnings conference calls and the corresponding market reaction. We find that conference call linguistic tone is a significant predictor of abnormal returns and trading volume. Furthermore, conference call tone dominates earnings surprises over the 60 trading days following the call. The question and answer portion of the call has incremental explanatory power for the post-earnings-announcement drift and this significance is primarily concentrated in firms that do not pay dividends, illustrating differences in investor behavior based on the level of cash flow uncertainty. Additionally, we find that a context specific linguistic dictionary is more powerful than a more widely used general dictionary (Harvard IV-4 Psychosocial).

This study documents the publicly traded equity real estate investment trust (REIT) universe during the modern REIT era (early 1990s through the present). The growth and consolidation of the indust...

This is the first study to examine the post-earnings-announcement drift anomaly in a Real Estate Investment Trust (REIT) context. The efficient markets hypothesis suggests that unexpected earnings should be fully incorporated into asset prices soon after being publicly announced. We hypothesize that publicly announced earnings signals may be more certain for REITs due to the presence of a parallel (private) asset market, suggesting less drift for REIT stocks. However, we find a large REIT drift component that is both statistically and economically significant. Furthermore, while the initial earnings surprise response is more muted for REITs, we find that the magnitude of the drift is significantly larger for REITs than for ordinary common stocks (NonREITs). Thus, information does not appear to move between the private and public asset markets in such a way as to render REIT earnings signals more certain than NonREIT earnings signals.

Using computer based content analysis, we quantify the linguistic tone of quarterly earnings conference calls for publicly traded Real Estate Investment Trusts (REITs). After controlling for the earnings announcement, we examine the relation between conference call tone and the contemporaneous stock price reaction. We find that the tone of the conference call dialogue has significant explanatory power for the abnormal returns at and immediately following quarterly earnings announcements. The question and answer portion of the conference calls dominates prepared managerial introductory remarks in explanatory significance. Furthermore, an overall positive tone in the conference call discussion between management and analysts is found to nearly offset the damaging effects of a negative earnings surprise.

We examine the determinants of foreign real estate investment relative to the domestic case using the portfolios of a large sample of publicly traded real estate investment companies; where foreign investment is defined as the property owner headquarters being located in a different country than a given asset. The cross-sectional results provide strong evidence that real estate firms are more likely to take a smaller stake in larger assets when investing abroad. The penchant for large assets holds when controlling for economic activity, real estate investment opportunities, depth and sophistication of the capital markets, investor protection and the legal framework, administrative burdens and regulatory limitations, and the socio-cultural and political environment at both the property nation and headquarter nation levels. In general, foreign ownership is less likely with industrial, office, retail, and self-storage properties. Capital market development is consistently negatively related to foreign investment.

In this study we extracted the linguistic tones of managers and analysts during earnings conference calls and compared the differences between them. We found that manager tones convey much more optimism (less pessimism) than their analyst counterparts and investors (particularly institutional investors) react more strongly to analyst tones.

We examine the impact of conference call tones on the direction and magnitude of subsequent manager trades. Our univariate results show that corporate insiders buy company shares following negative-tone conference calls, and sell shares following positive-tone conference calls. This inverse call tone-trading pattern holds for both managers’ introductory sessions and subsequent question and answer (Q&A) sessions. Our multivariate results confirm the univariate call tone-trading patterns and show that contrarian manager trades are mostly driven by managerial selling activity. In contrast to the consistent and strong evidence of managers trading in the opposite direction of their call tones, we find no evidence of managers trading in the same direction of their call tones. We also examine the impact of analyst Q&A challenges on post-call manager trades. Our findings suggest that managers learn from analyst feedback and adjust their post-call trades accordingly.

We study the relations between governance mechanisms (internal and external), conference call voluntary disclosures (incidence and length), and CEO compensation using hand-collected data on conference calls, corporate governance, and compensation. We hypothesize and show that institutions push for more frequent and longer conference calls in order to obtain more information with which to evaluate their investment. While independent directors push to hold conference calls, they may also prefer to have shorter conference calls to avoid potential lawsuits, proprietary costs, and/or loss of reputation that can arise from releasing too much information. Entrenched executives seek to minimize risk (such as employment and/or litigation risk) by limiting the length of conference calls or by avoiding conference calls altogether. In addition, contrary to recently proposed hypotheses, we find that executives do not receive additional compensation for bearing the risks of holding voluntary conference calls.

We examine the industry-level relation between the two dominant asset pricing anomalies, the continuation of past price movements (momentum) and the incomplete reaction to earnings news (post-earnings-announcement drift). With the former having long been established in REIT returns, and the latter having only recently been documented, we show that the two returns phenomena are highly related in both the cross-section and time-series of industry-level returns, and the relation is negative. Additionally, the payoff to a REIT drift strategy largely dominates the payoff to a REIT momentum strategy in terms of greater economic magnitude and statistical significance.