Accessibility navigation

Which sentiment indicators matter? Evidence from the European commercial real estate market

Heinig, S., Nanda, A. and Tsolacos, S. (2020) Which sentiment indicators matter? Evidence from the European commercial real estate market. Journal of Real Estate Research, 42 (4). pp. 499-530. ISSN 0896-5803

[img] Text - Accepted Version
· Restricted to Repository staff only


It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing.

To link to this item DOI: 10.1080/08965803.2020.1845562


Measuring sentiment has been at the center of research for many years. While direct sentiment measures are assumed to be more suitable, we examine the construction and usability of indirect measures in the absence of direct measures in Europe. Driven by the unavailability of direct measure for most of the European countries in our study, we follow the general belief, that each imperfect sentiment proxy at least to a certain extent contains some pure market sentiment. We present a set of four sentiment indicators relevant to real estate. In order to examine their relative importance, we apply them in a cap rate modelling framework with a sample of both developed and less developed European real estate markets. Forecast evaluations and goodness-of-fit measures reveal that models incorporating our sentiment measures improve of the standard model specification of cap rates. We further find that sentiment has a stronger impact on economically weaker regions with less developed real estate markets in Europe, suggesting that investors may be relying on sentiment for price discovery in these markets. In addition, the use of a constructed search volume index suggests that markets with less publicly available information may experience a higher degree in searches. Our study highlights an application of online-search based sentiment measure in those informationally inefficient and less developed markets.

Item Type:Article
Divisions:Henley Business School > Real Estate and Planning
Henley Business School > ICMA Centre
ID Code:86939
Publisher:American Real Estate Society

University Staff: Request a correction | Centaur Editors: Update this record

Page navigation