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Which Sentiment Indicators Matter? An Analysis of the European Commercial Real Estate Market

Author

Listed:
  • Steffen Heinig

    (Henley Business School, University of Reading)

  • Anupam Nanda

    (Henley Business School, University of Reading)

  • Sotiris Tsolacos

    (Henley Business School, University of Reading)

Abstract

Property markets exhibit several classic market inefficiencies, which can lead to irrational behaviour and a better understanding of connections between yield modeling and the role of sentiment is of immense interest to property funds, pension funds, banks, insurance companies and other participants. While past studies have examined the role of sentiment in market performance, the conclusions have remained mixed. This paper compares established models against two new innovative methods, paying more attention towards the expectations of market participants to explain yield adjustments and swings in property values. Forecast evaluations reveal that models incorporating property-specific and google trend sentiment outperform the base model. The European market offers an interesting testing ground for our research questions as the interest of investors and banks in abrupt movements in yields and pricing and the role of market sentiment has grown in Europe post global financial crisis due to high level of nonperforming loans.

Suggested Citation

  • Steffen Heinig & Anupam Nanda & Sotiris Tsolacos, 2016. "Which Sentiment Indicators Matter? An Analysis of the European Commercial Real Estate Market," ICMA Centre Discussion Papers in Finance icma-dp2016-04, Henley Business School, University of Reading.
    • Handle: RePEc:rdg:icmadp:icma-dp2016-04
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    File URL: http://www.henley.ac.uk/files/pdf/research/papers-publications/ICM-2016-04_Heinig_et_al.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    yield modelling; property lending; sentiment;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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