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Intraday REIT Liquidity

Author

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  • William Bertin

    () (Department of Finance, School of Business, Bond University, Gold Coast, QLD, Australia 4229, Author-Workplace-Homepage:)

  • Paul Kofman

    () (Department of Finance, Faculty of Economics and Commerce, The University of Melbourne, Parkville, Victoria 3010, Australia)

  • Professor David Michayluk

    () (College of Business Administration, 206 Ballentine Hall, University of Rhode Island, Kingston, RI 02818)

  • Laurie Prather

    () (Department of Finance, School of Business, Bond University, Gold Coast, QLD, Australia 4229)

Abstract

Real Estate Investment Trusts (REITs) may be classified as a real estate investment or more generally as an equity investment. While REITs are more liquid than direct real estate investments, the liquidity relationship between REITs and common stocks is less clear-cut. This study measures and analyzes the liquidity differences between REITs and other common stocks. The intraday variations documented in this study have implications for: 1) the appropriate timing of trades to minimize transaction costs and, 2) the substitutability of investments if illiquidity is priced. Our results reveal intraday patterns indicating lower liquidity for REITs than for common stocks when the liquidity measure is friction-based. In contrast, activity measures exhibit higher liquidity levels for REITs than for common stocks but this difference is only statistically significant at the beginning of the trading day. Finally, from an economic perspective we find that the ability to trade without influencing prices is 15-25% greater for non-REITS compared to REITs, and the price of immediacy is 7% higher for REITs.

Suggested Citation

  • William Bertin & Paul Kofman & Professor David Michayluk & Laurie Prather, 2005. "Intraday REIT Liquidity," Journal of Real Estate Research, American Real Estate Society, vol. 27(2), pages 155-176.
  • Handle: RePEc:jre:issued:v:27:n:2:2005:p:155-176
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    References listed on IDEAS

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    1. David J. Hartzell & David G. Shulma & Vice President, 1987. "Refining the Analysis of Regional Diversification for Income-Producing Real Estate," Journal of Real Estate Research, American Real Estate Society, vol. 2(2), pages 85-95.
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    Cited by:

    1. Jaakko Niskanen & Heidi Falkenbach, 2011. "Liquidity of European real estate equities: REITs and REOCs," International Journal of Strategic Property Management, Taylor & Francis Journals, pages 173-187.
    2. Paul Anglin & Robert Edelstein & Yanmin Gao & Desmond Tsang, 2011. "How Does Corporate Governance Affect the Quality of Investor Information? The Curious Case of REITs," Journal of Real Estate Research, American Real Estate Society, pages 1-24.
    3. Denis Schweizer & Lars Haß & Lutz Johanning & Bernd Rudolph, 2013. "Do Alternative Real Estate Investment Vehicles Add Value to REITs? Evidence from German Open-ended Property Funds," The Journal of Real Estate Finance and Economics, Springer, pages 65-82.
    4. Mathew, Prem G. & Michayluk, David & Kofman, Paul, 2007. "Are foreign issuers complying with Regulation Fair Disclosure?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(3), pages 246-260, July.
    5. Benjamin Blau & Jared Egginton & Matthew Hill, 2016. "REITs and market friction," Review of Quantitative Finance and Accounting, Springer, pages 1-24.
    6. Benjamin Blau & Jared F. Egginton & Matthew Hill, 2016. "REITs and market friction," Review of Quantitative Finance and Accounting, Springer, pages 1-24.
    7. Jinliang Li & Robert M. Mooradian & Shiawee X. Yang, 2009. "The Information Content of the NCREIF Index," Journal of Real Estate Research, American Real Estate Society, pages 93-116.
    8. Heidi Falkenbach & Jaakko Niskanen & Sami Kiehelä, 2013. "Development and performance of the public real estate investment sector in Finland," International Journal of Strategic Property Management, Taylor & Francis Journals, pages 233-247.

    More about this item

    JEL classification:

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

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