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The Geography of Real Property Information and Investment: Firm Location, Asset Location and Institutional Ownership
Author(s) -
Ling David C.,
Wang Chongyu,
Zhou Tingyu
Publication year - 2019
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.12294
Subject(s) - real estate investment trust , real estate , metropolitan area , asset (computer security) , portfolio , institutional investor , exploit , business , investment (military) , sample (material) , finance , financial economics , economics , corporate governance , politics , geography , chemistry , computer security , archaeology , chromatography , computer science , political science , law
Using a sample of Real Estate Investment Trusts (REITs), we show that institutional investors exploit location‐based information asymmetries by overweighting firms headquartered locally and those with greater economic interests in the investor's home metropolitan statistical area (MSA). This asset allocation strategy is associated with superior portfolio performance. In a difference‐in‐difference‐in‐differences analysis of investor headquarters relocations, we find that investors tend to increase their ownership of REITs that have property holdings in the market to which the investor relocates. Our findings highlight the importance of understanding the relation between information advantages and the geography of firm's operations, as well as the implications on ownership patterns and portfolio construction.