Commonality in Liquidity and Real Estate Securities

Martin Hoesli, Anjeza Kadilli () and Kustrim Reka ()
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Anjeza Kadilli: University of Geneva
Kustrim Reka: University of Geneva

The Journal of Real Estate Finance and Economics, 2017, vol. 55, issue 1, No 3, 65-105

Abstract: Abstract We conduct an empirical investigation of the exposure of U.S. REIT returns to commonality in liquidity. Taking advantage of the specific characteristics of REITs, we study 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 represent significant risk factors for 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 could explain (at least partly) the small impact of commonality on asset prices documented in the extant literature. We also analyze the economic sources of commonality in liquidity and find that demand-side factors prevail over supply-side factors.

Keywords: Real estate securities; REITs; Commonality in liquidity; Liquidity risk; Multi-factor model; Threshold regression; Panel data; G12; G01; G02 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (8)

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Working Paper: Commonality in Liquidity and Real Estate Securities (2014)
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DOI: 10.1007/s11146-016-9554-3

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