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.


Mots-clés:
Type de conférence:
full paper
Faculté:
Economie et Services
Ecole:
EHL
Institut:
Aucun institut
Classification:
Economie/gestion
Adresse bibliogr.:
New Delhi, India, 19-21 December 2019
Date:
2019-12
New Delhi, India
19-21 December 2019
Pagination:
34 p.
Publié dans:
Proceedings of World finance & banking symposium
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Note: The status of this file is: restricted


 Notice créée le 2020-05-19, modifiée le 2020-05-19

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