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Insider Trading in REITs: Evidence from Informed Stock Option Exercise Around Seasoned Equity Offerings

Author

Listed:
  • Brandon Cline

    (Mississippi State University)

  • Xudong Fu

    (Southern Illinois University - Edwardsville)

  • Thomas M. Springer

    (Clemson University)

  • Tian Tang

    (University of Louisville)

Abstract

By merging REIT SEO data with executive option exercise data, we investigate insider trading implications around REIT SEOs. Event study results show persistent negative abnormal returns for long-term SEO aftermarket performance. After isolating "strategic" option exercises of REIT insiders around the SEO, we assess whether REIT insiders can benefit from asymmetric information. We find enhanced exercise activity around the SEO consistent with REIT executives acting on insider information that the REIT is overvalued at the SEO. However, when exercise activity is linked to long-term performance the results suggest that REIT insiders are not especially skilled in identifying which SEOs will underperform.

Suggested Citation

  • Brandon Cline & Xudong Fu & Thomas M. Springer & Tian Tang, 2014. "Insider Trading in REITs: Evidence from Informed Stock Option Exercise Around Seasoned Equity Offerings," Journal of Real Estate Research, American Real Estate Society, vol. 36(4), pages 511-540.
    • Handle: RePEc:jre:issued:v:36:n:4:2014:p:511-540
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    Citations

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    Cited by:

    1. Steffen Westermann & Scott Niblock & Michael Kortt, 2018. "Corporate social responsibility and the performance of Australian REITs: a rolling regression approach," Journal of Asset Management, Palgrave Macmillan, vol. 19(4), pages 222-234, July.
    2. Steffen Westermann & Scott J. Niblock & Michael A. Kortt, 2018. "A Review of Corporate Social Responsibility and Real Estate Investment Trust Studies: An Australian Perspective," Economic Papers, The Economic Society of Australia, vol. 37(1), pages 92-110, March.
    3. Helen X. H. Bao & Steven Haotong Li, 2016. "Overconfidence And Real Estate Research: A Survey Of The Literature," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(04), pages 1-24, September.
    4. Elizabeth Devos & Erik Devos & Seow Eng Ong & Andrew C. Spieler, 2019. "Are REIT Investors Overly Optimistic after Equity Offerings?: Evidence from Analyst Forecast Errors," The Journal of Real Estate Finance and Economics, Springer, vol. 59(2), pages 148-165, August.
    5. Soosung Hwang & Youngha Cho & Jinho Shin, 2020. "The impact of UK household overconfidence in public information on house prices," Journal of Property Research, Taylor & Francis Journals, vol. 37(4), pages 360-389, October.
    6. Jianfu Shen & Eddie C.M. Hui & Kwokyuen Fan, 2021. "Did Real Estate Professionals Anticipate the 2007-2008 Financial Crisis? Evidence from Insider Trading in the REITs," The Journal of Real Estate Finance and Economics, Springer, vol. 63(1), pages 122-142, July.

    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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