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| An Examination of Informed Traders and
the Market Microstructure of Real Estate Investment Trusts Author: Scott D. Below, Joseph K. Kiely, and Willard McIntosh Start Page: 335 Abstract: A significant body of
research exists documenting that REITs perform differently from other types of equity
securities, although the reasons for these differences are unclear. This study examines
the intraday trading behavior of Real Estate Investment Trusts (REITs). Specifically,
intraday REIT returns, volume, trading activity, and bid/ask spread are examined in an
attempt to better understand the patterns of intraday information flow for a sample of
REITs trading on the NYSE. After controlling for differences in market capitalization,
share price, and institutional holdings, this paper analyzes differences between REITs and
non-REITs, and between REITs that are widely held by institutions and those that are not.
The results suggest that, as a group, REITs exhibit lower average volumes and number of
trades than do similar non-REITs. In addition, the findings suggest that mortgage REITs
trade at spreads that are wider. Surprisingly, the analysis of institutional ownership
suggests that equity REITs that are widely held by institutions exhibit the largest
divergence from non-REITs in terms of both intraday trading activity and volume, but at
the same time trade closer to non-REITs in terms of bid/ask spread. Overall, the results
of this study confirm that REITs are treated differently by investors than similar
non-REITs, and the institutional ownership findings suggest that trading activity is less
important as a determinant of REIT performance than is the level of institutional
ownership. |
