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Investor attention for retail and institutional investors: a test on the real estate market

Investor attention for retail and institutional investors: a test on the real estate market. Gianluca Mattarocci , University of Rome “Tor Vergata” gianluca.mattarocci@uniroma2.it Georgios Siligardos , University of Rome “Tor Vergata” georgios.siligardos@uniroma2.it.

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Investor attention for retail and institutional investors: a test on the real estate market

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  1. Investor attention for retail and institutional investors: a test on the real estate market Gianluca Mattarocci, University of Rome “Tor Vergata” gianluca.mattarocci@uniroma2.it Georgios Siligardos, University of Rome “Tor Vergata” georgios.siligardos@uniroma2.it Edinburgh – June 13td-16th , 2012

  2. Index • Introduction • Literature review • Empirical analysis: • Sample • Methodology • Results • Conclusions

  3. Introduction • Market proxies of investor attention are identified by the extreme returns (Barber and Odean, 2008), trading volume (Gervais, Kaniel, and Mingelgrin, 2001), and price limits (Seasholes and Wu, 2007). • News and headlines represent a more direct approach for the investor attention measurement which assumes that the analysis of financial newspapers or websites influence significantly the investor attention (Yuan, 2008). • Da, Engelberg, and Gao (2011) proposes the first direct proxy of the investor attention base on aggregate search frequency in Google. Research Questions Is the new investor attention measure (as normally assumed) more suitable for retail investors respect to institutional one?

  4. Index • Introduction • Literature review • Empirical analysis: • Sample • Methodology • Results • Conclusions

  5. Literature review (1/2) In the investment selection process, the choice is normally driven by the individual attitudes, brand or product features (Maheswaran and Meyers-Levy, 1990). Brand or product characteristics are widely believed to impact significantly upon the weighting of selection criteria (Gupta, 1988).

  6. Literature review (2/2) The choice of the information source is affected by the financial literacy of the investor and in the mutual fund industry more financial skilled investors are those that use more frequently financial publications and/or prospectus (Alexander, Jones and Nigro, 1997). Institutional investors normally use more detailed information for the fund selection process and frequently available data could be integrated with interviews of the funds’ managers (Del Guercio and Tkac, 2002). For these type of investor the usefullness of free data sources (like internet) is normally lower with respect to retail ones (Da, Engelberg, and Gao, 2011).

  7. Index • Introduction • Literature review • Empirical analysis: • Sample • Methodology • Results • Conclusions

  8. Empirical analysis: Sample We consider all Italian real estate funds at December 31st, 2011 (Assogestioni) Summary statistics on the number of months with data available for each fund in the time horizon 2004- 2011

  9. Empirical analysis: Methodology (1/2)

  10. Empirical analysis: Methodology (2/2) For comparing investor attention measure we consider summary statistics, correlation matrix and the Kolmogorov - Smirnov test In order to study the causality relationship between the measures we compute a standard granger causality test (Holtz-Eakin, Newey and Rosen (1988). Relationships analyzed are: N° lags defined using the Schwert criterion

  11. Empirical analysis: Results (1/4) All investors Real estate investors

  12. Empirical analysis: Results (2/4) All investors Real estate investors

  13. All investors Empirical analysis: Results (3/4)

  14. Real estate investors Empirical analysis: Results (4/4)

  15. Index • Introduction • Literature review • Empirical analysis: • Sample • Methodology • Results • Conclusions

  16. Conclusions • Results suggest that institutional investors should consider both information channels (newspapers and internet) in order to measure wherever the investor attention connected to their products has a positive or negative sign. • Further research development has to consider the different impact of the information collected on Internet and the newspapers for explaining the performance achieved by the funds and the increase/decrease of the demand of a financial instrument. Furthermore a deep analysis of the content of the news could allow studying the differences in the behavior of investor attention proxies for retail and institutional investors, such as the classification of positive or negative news (Tetlock, 2007).

  17. Contact information Gianluca Mattarocci University of Rome Tor Vergata e-mail: gianluca.mattarocci@uniroma2.it Georgios Siligardos University of Rome Tor Vergata e-mail: georgios.siligardos@uniroma2.it

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