Explaining the discount in closed open-ended real estate funds in Germany

Sebastian Schnejdar and Michael Heinrich

ERES from European Real Estate Society (ERES)

Abstract: In succession of the financial crisis various German open-ended real estate funds were closed and are now forced to fully liquidate their assets. Since Germany has an underdeveloped REIT market compared to most Anglo-Saxon countries, this has severe consequences for the efficiency of the capital allocation towards real estate. The paper therefore investigates to what extent the closing of these open-ended real estate funds were caused by their own economic situation (captured by e.g. liquidity ratio, asset structure). In detail, the paper analyses the upcoming discount in closed German open-ended funds. The discount is defined as the difference between the Net Asset Value and the aftermarket share price of the fund. The panel dataset contains unique monthly data for 9 finally closed open-ended real estate funds in Germany from 2008 to 2014. One first result indicates that fundamental economic operating numbers of the specific open-ended real estate funds can`t fully explain their discount. Therefore the Closed-End Fund Puzzle theory may be up to an adjustment in the context of open-ended real estate funds in order to identify suitable variables for irrational and herd behavior in explaining the discount on the macro-level.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2015-07-01
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2015_243

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