Momentum Strategies and Investor Sentiment in the REIT Market

Comparing across three momentum measures, we empirically find that the 52-week high strategy plays a dominant role in generating momentum profits in the Real Estate Investment Trust (REIT) market. The profitability of the 52-week high strategy, however, varies with the state of investor sentiment. Specifically, we find that the 52-week high momentum earns significantly positive returns following optimistic periods and significantly negative returns following pessimistic periods. Further evidence indicates that investor sentiment serves as a better predictive variable in explaining the REIT momentum than market states, business cycles, legislation changes, and monetary policy changes. Overall, our findings are in line with behavioral theories in explaining the REIT momentum.