Real Estate
Real estate insiders: appraisals, cycles and REITs
Property values are partly private
Listed property companies and REITs hold buildings whose value is set by periodic appraisals rather than by a continuous market price. Management sees vacancy, lease renewals and valuation work before investors do. Damodaran and Liu (1993, Review of Financial Studies) studied REITs that reappraise their properties: insiders bought after favourable appraisals and sold after unfavourable ones, before the public announcement, with the strongest effect for negative appraisals.
Selling into the 2000s boom
Shen, Hui and Fan (2021, Journal of Real Estate Finance and Economics) examined REIT insider trades from 1996 to 2010. Insiders reduced their holdings significantly during the boom, as early as 2004, and sold more aggressively than insiders at real estate and construction firms. The authors find support for informed trading rather than for biased beliefs.
How far the evidence reaches
Both studies use US REITs. European property companies operate under other tax regimes and disclosure calendars, and the 1993 evidence predates today's market abuse rules. A single director's purchase in a property company says less than a pattern of trades across several insiders and quarters.