Why Does Price Deviate from Net Asset Value? The Case Of Singaporean Infrastructure Reits

This paper examines the determinants of the changes in premiums to NAV in infrastructure REIT (infra-REIT) share prices in Singapore over the 2017-2021 period. Samples of 11 listed Singaporean REITs (S-REITs) are selected to create a balanced panel data for the analysis. Our finding shows that infrastructure S-REITs have generally beentrading at premiums to their NAVs. The first part of the analysis shows that REIT premiums are positively related to REIT size (market cap), geographical region of investment, leverage and percentage of institutional ownership. On the other hand, REIT premiums are negatively related to dividend yield, volatility, volume, EBITDA and liquidity.Trading volume is found to be insignificant in explaining price and NAV divergence. The second part of the analysis finds that there is a higher proportion of uninformed (noise) traders when infra S-REIT prices are diverging from their NAV. This finding supports the Noise theory which implies that there is some evidence that noise traders are presentin the infra S-REIT market and their actions might cause irrational departure of REIT prices from the underlying NAV