Institutional Investors Tilt Their Real Estate Holdings Toward Quality, Too

This paper confirms and extends prior results regarding tilting of institutional investment in common stock toward quality. The evidence presented here suggests that, while both Real Estate Investment Trusts and institutional investors tilt their real estate holdings toward quality, the tilt is much more pronounced in the case of institutional investors. Controlling for quality, there is further evidence that institutional investors overweight locations where the share of local employments in business services, finance, insurance, and real estate, and transportation is relatively high (compared to national averages). This evidence is consistent with the hypothesis that significant sector tilting by institutional investors is induced by the constraints of the prudent man rule