Empirical analysis of the illiquidity premia of German real estate securities

Research output: Contribution to journalResearch articleContributedpeer-review

Contributors

Abstract

In this study, we analyze illiquidity premia and their effect on the expected returns of German real estate securities. To this end, we use a unique data set that includes real estate stocks, real estate investment trusts (REITs), and open- and closed-end real estate funds for 2003–2017. We follow Amihud’s (JFM 5:31–56, 2002) structural approach; specifically, we estimate Amihud’s illiquidity factors, investigate the relationships between expected returns and illiquidity, and analyze the effects of expected and unexpected market illiquidity on future returns. We show that illiquidity plays an important role in expected returns for real estate stocks and investment trusts (REITs); however, it has less clear effects on open- and closed-end funds. We find that the adjusted ILLIQ includes appropriate correction factors for securities with low trading activity and is a useful improvement. We also find evidence of structural breaks in the relationship between returns and illiquidity.

Details

Original languageEnglish
Pages (from-to)203-260
Number of pages58
JournalFinancial Markets and Portfolio Management
Volume36 (2022)
Issue number2
Publication statusPublished - 16 Oct 2021
Peer-reviewedYes

External IDs

ORCID /0000-0003-4359-987X/work/142255151

Keywords

ASJC Scopus subject areas

Keywords

  • Asset pricing, Illiquidity, Real estate, REITs, Risk-factors

Library keywords