The dark and the bright side of liquidity risks: evidence from open-end real estate funds in Germany

Falko Fecht and Michael Wedow

No 2009,10, Discussion Paper Series 2: Banking and Financial Studies from Deutsche Bundesbank

Abstract: We use a unique and comprehensive data set on open-end real estate funds in Germany to study a liquidity crisis that hit this industry between 2005 and 2006. Since this industry is comparably unregulated our data set permits us to contrast competing explanations of liquidity crisis. We find that fundamental factors matter for the liquidity outflow in normal times. During the crisis, however, they do not play a role. During the panic only strategic complementarities drive withdrawals. Furthermore, we find that funds with a higher load fee suffer from substantially larger outflows in the crisis period, while a higher load fee reduces gross outflows in normal times. As institutional investors predominately invest in funds with a low load fee this is in line with recent theory arguing that complementarities are mitigated by the involvement of large institutional investors who can at least partially correct for the coordination failure resulting from complementarities.

Keywords: Liquidity crisis; runs; strategic complementarities (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G23 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-ure
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The dark and the bright side of liquidity risks: Evidence from open-end real estate funds in Germany (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp2:200910

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