Do the individual moments of REIT return distributions affect institutional ownership patterns?

Abstract

This paper examines the determinants of institutional investment demand for Real Estate Investment Trust (REIT) common stock. Specifically, it explores whether the demand function of institutional investors is dependent on the first four moments of the REIT returns distribution. The objective is to determine whether institutional investment decisions concerning REITs are influenced by individual stock attributes such as the mean return, standard deviation of returns, skewness of returns and kurtosis of returns. The results suggest that standard deviation plays a significant role in the institutional demand for REITs, but no significant role is found for the higher moments of the return distribution. The results also suggest institutional investment in REITs is predictable a priori using the moments of the REIT return distribution.