Investor Sentiment, Liquidity, and NAV Discounts in the Real Estate Sector

This study develops a parsimonious framework linking investor sentiment, secondary-market liquidity, and net asset value (NAV) discounts in listed real estate. Concept analysis treats NAV discounts as a joint outcome of price discovery frictions and appraisal lag, with sentiment acting as a demand shock and liquidity serving as the transmission channel. The problem addressed is the limited causal evidence on whether sentiment-driven order flow widens or narrows NAV deviations, and under which market regimes this effect is most pronounced. A multi-method design is employed: panel regressions with fund and time fixed effects, high-frequency news/text sentiment indices, and multiple liquidity proxies (Amihud illiquidity, bid–ask spreads, market depth). Identification is strengthened through instrumental variables for sentiment (exogenous media tone shifts) and a VAR/VECM to capture dynamic adjustment, complemented by quantile regressions to test tail behavior. Results indicate that positive sentiment shocks reduce NAV discounts primarily via improved liquidity, while negative shocks significantly widen discounts; the liquidity channel explains a substantial share of the effect, and the impact is asymmetric and regime-dependent (stronger in stress states). Mean-reversion is observed, with roughly one-third of discount dislocations correcting within one quarter in high-liquidity regimes. The findings imply that enhancing market-making capacity, improving disclosure timeliness, and increasing appraisal frequency can attenuate sentiment-induced mispricing. The framework offers actionable diagnostics for fund managers, allocators, and regulators to balance market efficiency with investor protection.