Conference Agenda

In this paper, we examine whether there are effective corporate governance and information flow between the banking and research departments of banks, as well as whether banks’ information advantage benefits their affiliated security analysts by helping them to make more accurate recommendations and forecasts. Analysis of I/B/E/S REITs data from 2001 to 2017 suggests that the lending arms could transfer private information about the borrowers to the research analysts of their affiliated financial conglomerates. We demonstrate that bank-affiliated analysts have an information advantage in the post-loan initiation period as banking -affiliated analysts’ earnings forecast errors reduced by 6.92% post-loan initiation, and this information advantage was reduced after the Dodd-Frank Act as the banking affiliated analysts’ earnings forecast error increased.

This study investigates the value of political connections in mitigating the impact of policy uncertainty. Policy uncertainty reflects the uncertainty brought upon by the contents and the potential effects of government policy announcements. Utilizing Chinese real estate firms that have experienced frequent policy shocks, we adopt an event-study methodology with a novel approach using these policy shocks as exogenous sources of uncertainty. Examining policy shocks that pertain to the real estate industry over the period of 2010 to 2016, we show the presence of politically-connected directors effectively mitigates the adverse effect of policy uncertainty. Specifically, we find that political connections are positively associated with firms’ cumulative abnormal returns during periods of policy uncertainty. We further find the value of political connections is influenced by information contained in the policy announcements and fiscal environment that the firm is operating in, implying politically-connected firms possess an information advantage and have better access to scarce resources. Overall, our results highlight the importance of politically-connected directors and the conditions their connections are the most useful in the midst of policy uncertainty.

We propose a new conditional factor model to explain the cross-section of REIT returns. Using the instrumented principal component analysis (IPCA) approach, we extract five latent factors and form a conditional factor model, which outperforms traditional factor models in explaining the cross-section of REIT returns. We further map the latent factors with REIT characteristics and identify firm size, operating cash flows, earnings-to-price ratio, dividend yield, momentum, and REIT-type dummies as the most important contributors. Last, we provide economic rationales for the latent factors.

The beta anomaly has been observed to be remarkably robust in all major developed and emerging stock markets. Shen et al. (2021) have studied this phenomenon in the U.S. REIT market and have concluded that the beta anomaly is driven by institutional investors' preference for high-beta REITs based on the leverage constraints hypothesis. Behavioral theories also support the idea that the preference of optimistic investors for high-beta securities causes the low-risk effect. However, these behavioral explanations are inconsistent with the findings of Lin et al. (2009), which suggest that optimistic REIT investors generate higher subsequent REIT returns. The COVID-19 pandemic in March 2020 led to a pessimistic outlook for the capital market, resulting in expansive monetary policy shifts initiated by the U.S. government. This study employs a quantile autoregressive distributed lag (QARDL) with a fixed effect model and adopts a difference-in-difference approach to estimate whether the beta anomaly in the U.S. REIT market is different pre- and post-COVID-19-driven expansive monetary policy shifts. Through comprehensive examination with various empirical tests, the study's empirical results using QARDL indicate that high-beta REITs cause the low-risk effect in REIT markets when REITs are in a state of low or medium returns. However, when REITs are in a state of high returns, high-beta REITs have a significant positive impact on the returns of REITs. The study found that COVID-19-driven expansive monetary policy shifts exacerbate the beta anomaly phenomenon in low-return REITs. Conversely, in the high-return state of REITs, COVID-19 promotes the phenomenon of high-risk and high-return in the REIT market. Our QARDL supports the findings of both Lin et al. (2009) and Shen et al. (2021), indicating that the returns of REITs are affected differently depending on their return state. The study explores new REIT pricing factors related to monetary policy shifts and develops new beta-related investment strategies in different monetary conditions.