A behavioral interpretation of the nav discount puzzle in listed real estate companies
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Peer-reviewed
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Abstract
The NAV discount is a long standing puzzle in the listed real estate context. In this paper we extend the existing literature’s rational and noise trader explanations by exploring the influence of specific irrational behaviors. Based on behavioral biases identified in the stock and real estate markets, we hypothesize the existence of a relationship between lagged NAV growth and the NAV discount. The findings provide initial evidence of trend-chasing behavior between the dual real estate markets. The results have broader implications for the perception of the relationship between public and private real estate markets.
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Keywords
Judgemental Bias, Behavioural Economics, Noise Trader, Overreaction
Journal Title
Journal of Real Estate Portfolio Management
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Journal ISSN
1083-5547
Volume Title
24
Publisher
American Real Estate Society
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Sponsorship
Xu Yi Foundation for Financial Research (unknown)
Economic and Social Research Council (ES/P004296/1)
Economic and Social Research Council (ES/P004296/1)