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Commonality in Liquidity and Real Estate Securities

Author

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  • Martin HOESLI

    (University of Geneva, University of Aberdeen, and Kedge Business School)

  • Anjeza KADILLI

    (University of Geneva)

  • Kustrim REKA

    (University of Geneva)

Abstract

We conduct an empirical investigation of the pricing and economic sources of commonality in liquidity in the U.S. REIT market. Taking advantage of the specific characteristics of REITs, we analyze three types of commonality in liquidity: within-asset commonality, cross-asset commonality (with the stock market), and commonality with the underlying property market. We find evidence that the three types of commonality in liquidity are priced in REIT returns but only during bad market conditions. We also find that using a linear approach, rather than a conditional, would have underestimated the role of commonality in liquidity risk. This explains (at least partly) the small impact of commonality on asset prices documented in the extant literature. Finally, our analysis of the determinants of commonality in liquidity favors a demand-side explanation.

Suggested Citation

  • Martin HOESLI & Anjeza KADILLI & Kustrim REKA, 2014. "Commonality in Liquidity and Real Estate Securities," Swiss Finance Institute Research Paper Series 14-30, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1430
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    Cited by:

    1. David H. Downs & Bing Zhu, 2022. "Property market liquidity and REIT liquidity," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(6), pages 1462-1491, November.
    2. Thomas Richter, 2022. "Trading Activity in Public Real Estate Markets," JRFM, MDPI, vol. 15(9), pages 1-12, August.
    3. Abdulrahman Alhassan & Atsuyuki Naka & Abdullah Noman, 2021. "Oil Market Factors as a Source of Commonality in Liquidity in International Equity Markets," JRFM, MDPI, vol. 14(8), pages 1-33, August.
    4. Bryan D. MacGregor & Rainer Schulz & Yuan Zhao, 2021. "Performance and Market Maturity in Mutual Funds: Is Real Estate Different?," The Journal of Real Estate Finance and Economics, Springer, vol. 63(3), pages 437-492, October.
    5. Thomas Paul & Thomas Walther & André Küster-Simic, 2022. "Empirical analysis of the illiquidity premia of German real estate securities," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 36(2), pages 203-260, June.
    6. David C. Ling & Chongyu Wang & Tingyu Zhou, 2022. "Asset productivity, local information diffusion, and commercial real estate returns," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(1), pages 89-121, March.
    7. Fan He & Xuansen He, 2019. "A Continuous Differentiable Wavelet Shrinkage Function for Economic Data Denoising," Computational Economics, Springer;Society for Computational Economics, vol. 54(2), pages 729-761, August.
    8. Cheol Eun & Lingling Wang & Tim Zhang, 2022. "House Price Growth Synchronization and Business Cycle Alignment," The Journal of Real Estate Finance and Economics, Springer, vol. 65(4), pages 675-710, November.

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    More about this item

    Keywords

    Real Estate Securities; REITs; Commonality in Liquidity; Liquidity Risk; Asset Pricing; Threshold Regression; Panel Data;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G01 - Financial Economics - - General - - - Financial Crises
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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