Sentiments and prepayment hazard in CMBS loans

Das, Prashant (Ecole hôtelière de Lausanne, HES-SO // University of Applied Sciences Western Switzerland) ; Freybote, Julia (Portland State University, USA)

Rising property values are one explanation for increased prepayments of commercial mortgages as borrowers refinance to take out equity or sell their assets. However, the prepayment decisions may be driven by fundamentals and investor sentiment. We investigate the informative value of irrational investor sentiment for prepayments of loans underlying CMBS. We employ Cox proportional hazard models to analyze a sample of 10,728 multifamily securitized loans for the period of 2001 to 2015. We find that, controlling for fundamentals, interest rates, asset valuation and loan characteristics, irrational sentiment is able to explain the exercise of the prepayment option by fixed and floating rate borrowers in times of increased property prices and interest rates. The effect of sentiment on prepayment hazard is robust to different sentiment measures and originator, geographic and deal characteristics. Our findings suggest that investor sentiment is a source of information for lenders and CMBS investors to predict prepayments.


Keywords:
Conference Type:
full paper
Faculty:
Economie et Services
School:
EHL
Institute:
Aucun institut
Subject(s):
Economie/gestion
Publisher:
New Delhi, India, 19-21 December 2019
Date:
2019-12
New Delhi, India
19-21 December 2019
Pagination:
34 p.
Published in:
Proceedings of World finance & banking symposium
Appears in Collection:

Note: The status of this file is: restricted


 Record created 2020-05-19, last modified 2020-10-27

Fulltext:
Download fulltext
PDF

Rate this document:

Rate this document:
1
2
3
 
(Not yet reviewed)