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Title: Did real estate professionals anticipate the 2007-2008 financial crisis? Evidence from insider trading in the REITs
Authors: Shen, J 
Hui, ECM 
Fan, K 
Issue Date: Jul-2021
Source: Journal of real estate finance and economics, July 2021, v. 63, no. 1, p. 122-142
Abstract: This research examines whether real estate professionals detected the property bubble and foresaw the consequent financial crisis of 2007-2008. By analysing the insider trading activities within REITs from 1996 to 2010, we find that REIT insiders reduced their holdings significantly during the real estate boom period as early as 2004, before the financial crisis. Difference-in-difference analysis reveals that REIT insiders cashed out their positions more aggressively than insiders in real estate and construction firms. The findings support the informed trader hypothesis that managers and employees in REITs anticipated the burst of the real estate bubble and the imminent financial crisis, and shifted their wealth away from the real estate market to avoid potential losses. We find no evidence to support the biased belief hypothesis (Cheng et al., 2014) that REIT insiders were over-optimistic during the real estate boom period or that their inside trading behaviour was affected by local market performance.
Keywords: Insider trading
Real estate bubble
Informed trader
Biased belief
Publisher: Springer
Journal: Journal of real estate finance and economics 
ISSN: 0895-5638
EISSN: 1573-045X
DOI: 10.1007/s11146-020-09763-8
Rights: © Springer Science+Business Media, LLC, part of Springer Nature 2020
This version of the article has been accepted for publication, after peer review (when applicable) and is subject to Springer Nature’s AM terms of use (, but is not the Version of Record and does not reflect post-acceptance improvements, or any corrections. The Version of Record is available online at:
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