The Information Content of NAV Estimates

This paper investigates whether analysts’ estimates of firm fundamental value transmit unique information to security markets. Previous work has not studied analyst value estimates because of the scarcity of the release of such data. This study circumvents that limitation by considering the one type of firm for which a large sample of value estimates, known as the net asset value (NAV), exists: Real Estate Investment Trusts (REITs). Using a sample of 200 Equity REITs from 2001 to 2015, we document significant abnormal returns and share turnover on the announcement date of NAV revisions. This response is consistent with market reactions to announcements of other types of analysts’ estimates: earnings forecasts, price targets, and buy/sell recommendations. Our findings remain significant after controlling for these, suggesting the information contained in NAV revisions is incremental to that contained in other analyst estimates. Consistent with efficient information transmission, the market absorbs this new information quickly and completely.