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Geographically Overlapping Real Estate Assets, Liquidity Spillovers, and Liquidity Multiplier Effects

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  • Chongyu Wang

    (The University of Hong Kong)

  • Jeffrey P. Cohen

    (University of Connecticut)

  • John L. Glascock

    (University of Connecticut)

Abstract

When liquidity providers for one asset obtain information from other asset prices, this may magnify the (upward or downward) comovement of asset liquidity. It also may yield an illiquidity multiplier (Cespa and Foucault, Review of Financial Studies, 27(6), 1615–1660, 2014). We empirically test the magnitude of this illiquidity multiplier for a sample of U.S. equity real estate investment trusts (REITs) using spatial autoregressive models (Zhu and Milcheva, Journal of Real Estate Finance and Economics, 61(3), 443–475, 2018). We find significant liquidity spillovers among REITs with geographically overlapping real estate holdings. Our findings suggest that the multiplier effect impacts neighboring REITs through cross-asset learning about firm fundamentals. This effect is stronger during market turmoil, after the Decimalization (a source of exogenous variation), and for REITs headquartered in MSAs with less information asymmetry.

Suggested Citation

  • Chongyu Wang & Jeffrey P. Cohen & John L. Glascock, 2025. "Geographically Overlapping Real Estate Assets, Liquidity Spillovers, and Liquidity Multiplier Effects," The Journal of Real Estate Finance and Economics, Springer, vol. 71(1), pages 118-139, July.
    • Handle: RePEc:kap:jrefec:v:71:y:2025:i:1:d:10.1007_s11146-022-09905-0
    DOI: 10.1007/s11146-022-09905-0
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    Keywords

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    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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