Underlying asset liquidity, heterogeneously informed investors, and REITs excess returns

Chia Wu Lu, Tsung-Kang Chen*, Hsien Hsing Liao

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


Purpose – Real estate investment trust (REIT) stocks are well known for limited management discretion in investment, financing, and payout policies, implying little information asymmetry between informed and uninformed investors. Besides, due to the renowned illiquidity and complexity of physical real estate markets, investors may be heterogeneously informed. The authors aim to investigate these arguments using REIT panel data from 1993 to 2010. Design/methodology/approach – The authors simultaneously investigate the effects of heterogeneous information (PSOS) and information asymmetry (ADJPIN) on REIT excess returns by estimating panel data regressions controlling for both firm- and time-fixed effects. Findings – The results confirm that heterogeneous information (PSOS) is significantly and positively associated with REIT excess returns while information asymmetry (ADJPIN) is insignificant when controlling for other variables well known for affecting REIT excess returns. Originality/value – The effects of information asymmetry (ADJPIN) and heterogeneous information (PSOS) on REITs excess returns are rarely simultaneously discussed in the related literature, especially from the perspectives of limited managerial discretions, regulated dividend policy, and underlying asset liquidity (physical real estate markets). The results confirm the heterogeneous information arguments. Besides, the heterogeneous information (PSOS) effects become stronger when leverage and dividend yield are higher. Finally, the above effects of PSOS and ADJPIN on REIT excess returns are also robust during the real estate market growth period (2001-2008).

Original languageEnglish
Pages (from-to)72-96
Number of pages25
JournalManagerial Finance
Issue number1
StatePublished - 7 Jan 2014


  • Financial markets
  • Information
  • Real estate
  • Returns
  • Risk


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