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The Impact of Potential Private Information on REIT Liquidity

Author

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  • Bartley Danielsen
  • David Harrison

Abstract

This article is the winner of the Real Estate Investment Trusts manuscript prize (sponsored by the National Association of Real Estate Investment Trusts) presented at the 1999 American Real Estate Society Annual Meeting.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 Danielsen & David Harrison, 2000. "The Impact of Potential Private Information on REIT Liquidity," Journal of Real Estate Research, Taylor & Francis Journals, vol. 19(1), pages 49-72, January.
    • Handle: RePEc:taf:rjerxx:v:19:y:2000:i:1:p:49-72
    DOI: 10.1080/10835547.2000.12091010
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    Cited by:

    1. Bartley R. Danielsen & David M. Harrison & Robert A. Van Ness & Richard S. Warr, 2009. "REIT Auditor Fees and Financial Market Transparency," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(3), pages 515-557, September.
    2. Emily Zietz & Stacy Sirmans & Swint Friday, 2003. "The Environment and Performance of Real Estate Investment Trusts," Journal of Real Estate Portfolio Management, Taylor & Francis Journals, vol. 9(2), pages 127-165, January.
    3. George D. Cashman & David M. Harrison & Hainan Sheng, 2021. "Option Trading and REIT Returns," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(1), pages 332-389, March.
    4. Matiur Rahman, 2024. "Interactions between Equity REITs and S&P 500 Returns," International Journal of Economics and Financial Issues, Econjournals, vol. 14(3), pages 206-211, May.
    5. Jain, Pawan & Upadhyay, Arun, 2021. "Are REITs more resilient than non-REITs? Evidence from natural experiments," Japan and the World Economy, Elsevier, vol. 58(C).
    6. 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.
    7. 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, Taylor & Francis Journals, vol. 33(1), pages 1-24, January.
    8. J. Andrew Hansz & Wikrom Prombutr & Ying Zhang & Tingyu Zhou, 2017. "An Anatomy of the Interrelationship between Equity and Mortgage REITs," International Real Estate Review, Global Social Science Institute, vol. 20(3), pages 287-324.
    9. Pawan Jain & Mark Sunderman & K. Janean Westby-Gibson, 2017. "REITs and Market Microstructure: A Comprehensive Analysis of Market Quality," Journal of Real Estate Research, Taylor & Francis Journals, vol. 39(1), pages 65-98, January.

    More about this item

    JEL classification:

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

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