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The Impact of Potential Private Information on REIT Liquidity



This article examines how, and to what degree, the potential for private information affects the liquidity of the market for real estate investment trusts (REITs). Consistent with the previous literature, we find that REITs trading on organized specialist exchanges are more liquid than those trading in the over-the-counter market. In addition, an examination of REIT market liquidity across individual firm portfolio holdings reveals REITs with more focused investment strategies are easier to value and more liquid than their diversified counterparts. Finally, our results also indicate liquidity improves as the percentage of the firm’s investment portfolio held as direct property (i.e., equity) investments rises. This finding is consistent with the belief that financial assets are informationally opaque and, therefore, uniquely difficult to value.

Suggested Citation

  • Bartley R. Danielsen & David M. Harrison, 2000. "The Impact of Potential Private Information on REIT Liquidity," Journal of Real Estate Research, American Real Estate Society, vol. 19(1), pages 49-71.
  • Handle: RePEc:jre:issued:v:18:n:3:1999:p:49-71

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    References listed on IDEAS

    1. Hasbrouck, Joel, 1991. " Measuring the Information Content of Stock Trades," Journal of Finance, American Finance Association, vol. 46(1), pages 179-207, March.
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    8. Grossman, Sanford J & Stiglitz, Joseph E, 1976. "Information and Competitive Price Systems," American Economic Review, American Economic Association, vol. 66(2), pages 246-253, May.
    9. Stoll, Hans R, 1989. " Inferring the Components of the Bid-Ask Spread: Theory and Empirical Tests," Journal of Finance, American Finance Association, vol. 44(1), pages 115-134, March.
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    12. Glascock, John L & Hughes, William T, Jr & Varshney, Sanjay B, 1998. "Analysis of REIT IPOs Using a Market Microstructure Approach: Anomalous Behavior or Asset Structure," The Journal of Real Estate Finance and Economics, Springer, vol. 16(3), pages 243-256, May.
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    Cited by:

    1. Yung, Kenneth & Nafar, Nadia, 2017. "Investor attention and the expected returns of reits," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 423-439.
    2. repec:ire:issued:v:20:n:03:2017:p:287-324 is not listed on IDEAS

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services


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