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The dark and the bright side of liquidity risks: evidence from open-end real estate funds in Germany

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  • Fecht, Falko
  • Wedow, Michael

Abstract

We use a unique and comprehensive data set on open-end real estate funds in Germany to study a liquidity crisis that hit this industry between 2005 and 2006. Since this industry is comparably unregulated our data set permits us to contrast competing explanations of liquidity crisis. We find that fundamental factors matter for the liquidity outflow in normal times. During the crisis, however, they do not play a role. During the panic only strategic complementarities drive withdrawals. Furthermore, we find that funds with a higher load fee suffer from substantially larger outflows in the crisis period, while a higher load fee reduces gross outflows in normal times. As institutional investors predominately invest in funds with a low load fee this is in line with recent theory arguing that complementarities are mitigated by the involvement of large institutional investors who can at least partially correct for the coordination failure resulting from complementarities. --

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Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 2: Banking and Financial Studies with number 2009,10.

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Date of creation: 2009
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Handle: RePEc:zbw:bubdp2:200910

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Keywords: Liquidity crisis; runs; strategic complementarities;

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Cited by:
  1. Michael Stein, 2013. "German Real Estate Funds – Changes in Return Distributions and Portfolio Favourability," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0454, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. Dötz, Niko & Weth, Mark, 2013. "Cash holdings of German open-end equity funds: Does ownership matter?," Discussion Papers 47/2013, Deutsche Bundesbank, Research Centre.

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