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

Attention is a scarce cognitive resource (Kahneman, 1973) and investorsí limited attention can affect asset pricing statics as well as dynamics (Peng and Xiong, 2006). Literature on the measurement of the investor attention proposes indirect measures based on market data or news. Market proxies 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, under the assumption that the analysis of financial/economic newspapers or websites, influence significantly the investor attention (Yuan, 2008). Da, Engelberg, and Gao (2011) proposes the first direct proxy of the investor attention based on a aggregate search frequency in Google. The approach proposed by the authors is assumed as an appropriate proxy of the investor attention only for retail investors but no empirical evidence support this assumption. Real estate funds represent the main indirect real estate investment opportunities for the European market and in some countries (Germany, Italy, etc) fund managers can offer products to all investors or restrict the subscribers only to institutional investors (Hoesli and Lekander, 2008). The role of institutional real estate funds for these markets is not residual on the basis of the number of products offered and on the basis of the asset under management (Scenari Immobiliari, 2010). We test the different usefulness of the Google proxy for real estate fund available to retail investors respect to those reserved to institutional investor. Considering data collected from Google insight and Factiva for the time period 2004-2011, we compare the measures of investor attention for all the Italian funds reserved to institutional investors respect to other funds. The results of the Google measures are correlated with news concerning both institutional and retail funds. From our analysis emerged that the correlation is higher and more significant for the institutional funds and the availability of news implies an increase of the amount of research made on Google search engine.On the basis of the results achieved, also institutional real estate funds have to consider their visibility on the Internet because any news can cause an increase of the investorsí attention to all the information available on Internet.