Information Diffusion in the U.S. Real Estate Investment
Trust Market
Masaki Mori
Published online: 6 May 2014

Abstract

This study examines the information diffusion process in the U.S. Real Estate
Investment Trust (REIT) market with a focus on the impacts of changing market
environments, information supply, and information demand on the lead-lag effect. The
results suggest that a significant lead-lag relationship exists between the lagged returns of
big REITs and the current returns of small REITs. This relationship has slightly decreased
along with policy and environment changes that occurred in the U.S. REIT market during
the study period from 1986 to 2012, while still remaining significant in the most recent
REIT market. The process of information diffusion is becoming unstable in recent years
and the reverse lead-lag effect fromsmall REITs to bigREITs is observed especiallywhen
REIT market liquidity and return volatility are high. The lead-lag effect among REITs is
driven largely by slow adjustment to negative information, which is magnified by a lack of
information supply, especially as demand for such information increases. Finally, information
flow from REITs with more media coverage to those with less media coverage
becomes even more sluggish than the information flow from big REITs to small REITs.