In this study, we examine the asymmetric effect of positive and negative real estate news on REIT market returns. While findings in the general stock market show a greater market reaction to negative news, we find that the REIT market reacts predominantly to positive rather than to negative real estate news. We show that the content of positive real estate news becomes significantly related to REIT market returns in the modern REIT era and in recession periods. We further find that the asymmetric market reaction to positive real estate news is apparent only in REITs with high institutional ownership and REITs that report high rental income. Our findings imply that the REIT market’s diversification benefits and its unique institutional features could be the driving factors for the asymmetric market responses. In additional analysis, we show that there exists little market reversal in subsequent periods, implying that REIT investors respond to the information contained in the news content and do not solely act on their sentiment. Lastly, we show that our findings are robust to alternative news and return measures.
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Birz et al. (2021) studied this question.
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