Investors' Opinion Divergence and the REIT Post-Repurchase Announcement Price Drift

Abstract

Executive Summary. This study examines whether the divergence of opinions among investors is a significant determinant of the real estate investment trust (REIT) post-repurchase announcement price drift. We find that change in trading turnover, a proxy for divergence of investors' opinions, is negatively related to the REIT post-repurchase announcement returns. Alternative measures of opinion divergence such as change in risk and earnings surprises are not associated with the REIT long-term return anomaly. We also find that the signaling-delayed reaction and overreaction hypotheses cannot explain the REIT post-repurchase return price drift. In short, our results suggest that divergence of opinions among investors can help explain the REIT postrepurchase announcement returns.