Liquidity and Asset pricing: Evidence from the European Real Estate Stock Market

Stephan Lang and Alexander Scholz

ERES from European Real Estate Society (ERES)

Abstract: The purpose of this paper is to provide evidence of the ability of liquidity to serve as a systematic risk factor in real estate asset pricing models in Europe. Using general equity data of 8.500 listed European firms, we construct 18 portfolios by a three-sequential, independent sorting procedure (Size, B/M and Liquidity) to compute the common risk factors SMB and HML as proposed by Fama and French (1993) as well as a liquidity risk factor. Our empirical findings suggest that liquidity is a significant pricing factor in real estate stock returns after accounting for the established asset pricing factors. These results are robust to conditional market tests and possible country effects. Furthermore, we run a comparative analysis with alternative multifactor models and prove that the liquidity-augmented pricing model is most appropriate for explaining real estate stock returns.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2013-01-01
New Economics Papers: this item is included in nep-fmk
References: Add references at CitEc
Citations:

Downloads: (external link)
https://eres.architexturez.net/doc/oai-eres-id-eres2013-230 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2013_230

Access Statistics for this paper

More papers in ERES from European Real Estate Society (ERES) Contact information at EDIRC.
Bibliographic data for series maintained by Architexturez Imprints ().