Commonality in Liquidity and Real Estate Securities

Martin Hoesli, Anjeza Kadilli and Kustrim Reka
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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

No 14-30, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

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.

Keywords: Real Estate Securities; REITs; Commonality in Liquidity; Liquidity Risk; Asset Pricing; Threshold Regression; Panel Data (search for similar items in EconPapers)
JEL-codes: G01 G02 G12 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2014-05
New Economics Papers: this item is included in nep-mst and nep-ure
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Journal Article: Commonality in Liquidity and Real Estate Securities (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1430

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