Market Efficiency and NAV Discounts: A Cross-Sectional Analysis of REITs in Developed Economies

This study investigates the dynamics of market efficiency through the lens of Net Asset Value (NAV) discounts in Real Estate Investment Trusts (REITs) across developed economies. The concept builds upon the persistent observation that REITs often trade at premiums or discounts relative to their underlying asset values, a phenomenon that challenges the assumptions of efficient market theory. A cross-sectional framework is constructed to analyze the interplay between firm-level characteristics, regulatory environments, governance practices, and investor sentiment in shaping valuation outcomes. The research problem lies in the limited capacity of traditional financial determinants to fully explain the persistence of NAV discounts in advanced markets where transparency and institutional maturity are expected to reduce pricing anomalies. Methodologically, the study employs panel data econometric modeling combined with comparative cross-country analysis of REITs in the United States, United Kingdom, Japan, Australia, and Western Europe. Results demonstrate that governance quality and regulatory strength contribute to narrower NAV discounts, yet behavioral factors such as investor sentiment continue to drive significant deviations from intrinsic value. The findings reveal that structural and informational asymmetries persist even in mature markets, highlighting the bounded nature of market efficiency. The implications extend to investors, policymakers, and regulators by underscoring the need for integrative frameworks that align financial, institutional, and behavioral dimensions to enhance valuation accuracy and capital allocation in global REIT markets. Keywords Market efficiency, NAV discounts, REITs, developed economies, valuation anomalies, governance, regulatory frameworks, investor sentiment, real estate markets, capital allocation