Intraday REIT Liquidity

William Bertin (), Paul Kofman (), David Michayluk () and Laurie Prather ()
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William Bertin: Department of Finance, School of Business, Bond University, Gold Coast, QLD, Australia 4229, Author-Workplace-Homepage:
Paul Kofman: Department of Finance, Faculty of Economics and Commerce, The University of Melbourne, Parkville, Victoria 3010, Australia
Laurie Prather: Department of Finance, School of Business, Bond University, Gold Coast, QLD, Australia 4229

Journal of Real Estate Research, 2005, vol. 27, issue 2, pages 155-176

Abstract: Real Estate Investment Trusts (REITs) may be classified as a real estate investment or more generally as an equity investment. While REITs are more liquid than direct real estate investments, the liquidity relationship between REITs and common stocks is less clear-cut. This study measures and analyzes the liquidity differences between REITs and other common stocks. The intraday variations documented in this study have implications for: 1) the appropriate timing of trades to minimize transaction costs and, 2) the substitutability of investments if illiquidity is priced. Our results reveal intraday patterns indicating lower liquidity for REITs than for common stocks when the liquidity measure is friction-based. In contrast, activity measures exhibit higher liquidity levels for REITs than for common stocks but this difference is only statistically significant at the beginning of the trading day. Finally, from an economic perspective we find that the ability to trade without influencing prices is 15-25% greater for non-REITS compared to REITs, and the price of immediacy is 7% higher for REITs.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 2005

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