Gianluca Marcato
Professor of Finance and Real Estate
Head of Department, Real Estate and Planning
Director, Certificate in Government Property Leadership
Director, INREV / Henley Certificate in Non-Listed Real Estate Investment
Sentiment and Momentum
Mixed Feelings About Media Political Bias: Evidence from the Land Market in China (with F. Zhang and C. Zheng), Working Paper
Home Bias in Local Analysts: Location, Familiarity, and SOEs (with F. Zhang and C. Zheng), Working Paper
Herding Behaviour Among Information Intermediaries (with F. Zhang and C. Zheng), Working Paper
Publications
Asymmetric Response of Demand-Supply Mismatch to Investor's Sentiment (with A. Nanda)
Journal of Real Estate Finance and Economics, 2022
Abstract: As expectations change, we may observe asymmetry in responses of economic agents over various phases of the economic cycles. In this paper, we analyze both demand and supply side information to understand the dynamics of price determination in the real estate market and examine the relationship between expectation parameters and demand-supply mismatch. Our hypothesis builds on the possibility that investors' call for action in terms of their buy/sell decision and adjustment in reservation prices may provide valuable insights into impending demand-supply imbalances in the market. We study several real estate sectors to inform our analysis. The timeframe of our analysis (1995-2010) allows us to observe market dynamics over several economic cycles. We test our hypothesis variously using several measures of market activity within a structural panel VAR framework. Our analysis suggests that investors' attitude may have substantial and statistically significant feedback effects in price determination. These results indicate noticeable asymmetry in responses during the boom, normal and recessionary periods.
An Investigation into Sentiment-Induced Institutional Trading Behavior and Asset Pricing in the REIT Market (with P.K. Das and J. Freybote)
Journal of Real Estate Finance and Economics, 2015
Abstract: Institutional investors such as pension funds or insurance companies commonly invest in the unsecuritized and securitized real estate market.We investigate how institutional investor sentiment in the commercial real estate market affects institutional trading behavior in the REIT market and subsequently asset pricing. In particular, we test two alternative theories - flight to liquidity and style investing theory - to explain the sentiment-induced trading behavior of institutional investors in the REIT market for the pre-crisis (2002–2006), crisis (2007–2009) and post-crisis (2010–2012) period. We find that the applicability of either theory depends on economic conditions. In the precrisis period institutional investors switched capital in and out of REITs based on their sentiment in the private market (style investing). However, in the crisis period institutional investors switched capital from the illiquid private market to the more liquid REIT market (flight to liquidity). The flight to more liquid REITs continued into the post-crisis to a lesser extent and suggests that the financial crisis has changed institutional investment behavior. Our findings hold across different groups of REITs (e.g. high and low institutional ownership, S&P and non-S&P REITs) and property types. We also find that institutional real estate investor sentiment introduces a nonfundamental component into REIT pricing.
Information Content and Forecasting Ability of Sentiment Indicators: Case of Real Estate Market (with A. Nanda)
Journal of Real Estate Research, 2015
Abstract: We evaluate a number of real estate sentiment indices to ascertain current and forward-looking information content that may be useful for forecasting demand and supply activities. Analyzing the dynamic relationships within a Vector Auto-Regression (VAR) framework and using the quarterly US data over 1988-2010, we test the efficacy of several sentiment measures by comparing them with other coincident economic indicators. Overall, our analysis suggests that the sentiment in real estate convey valuable information that can help predict changes in real estate returns. These findings have important implications for investment decisions, from consumers’ as well as institutional investors’ perspectives.
Direct Investment in Real Estate: Momentum Profits and Their Robustness to Trading Costs (with T. Key)
Journal of Portfolio Management, 2005
Abstract: Despite the strong evidence of persistence in direct real estate returns at the segment level, the effectiveness of such strategies for property investors has not been thoroughly investigated. This paper presents results of simulated momentum and contrarian (buy winner or buy loser) investment strategies in UK property, using annual and monthly returns series. We find strong potential gains from momentum strategies based on preceding returns over a six to twelve month period. Contrarian strategies, by contrast, perform poorly. Whether these gains are attainable to real world investors depends on assumptions on transactions costs, but we find some momentum strategies still produce excess returns when net returns are used. These results also have implications for the pricing and performance of index-based property derivatives.