Geographically Overlapping Real Estate Assets, Liquidity Spillovers, and Liquidity Multiplier Effects

Wang, Chongyu; Cohen, Jeffrey P.; Glascock, John L.

doi:10.1007/s11146-022-09905-0

Cited by 2 publications

(2 citation statements)

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“…There is a feedback relationship between illiquidity shocks and volatility shocks (Zhang & Han, 2022). Wang, Cohen, and Glascock (2022) examined the asymmetric impact of frequency and magnitude shocks on return volatility across assets and markets. Cheng, Liu, Jiang, and Cao (2023) explored the stock liquidity effects on accrual anomaly, and their findings indicated that stock liquidity is negatively related to the accrual anomaly and that there is a causal relationship between the effect of stock liquidity and accrual anomaly.…”

Section: Measuring Liquidity and Stock Returnsmentioning

confidence: 99%

A new method for estimating liquidity and stock returns in Indian stock market

Sethy,

Tripathy

2024

CAFR

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PurposeThis study aims to explore the impact of systematic liquidity risk on the averaged cross-sectional equity return of the Indian equity market. It also examines the effects of illiquidity and decomposed illiquidity on the conditional volatility of the equity market.Design/methodology/approachThe present study employs the Liquidity Adjusted Capital Asset Pricing Model (LCAPM) for pricing systematic liquidity risk using the Fama & MacBeth cross-sectional regression model in the Indian stock market from January 1, 2012, to March 31, 2021. Further, the study employed an exponential generalized autoregressive conditional heteroscedastic (1,1) model to observe the impact of decomposed illiquidity on the equity market’s conditional volatility. The study also uses the Ordinary Least Square (OLS) model to illuminate the return-volatility-liquidity relationship.FindingsThe study’s findings indicate that the commonality between individual security liquidity and aggregate liquidity is positive, and the covariance of individual security liquidity and the market return negatively affects the expected return. The study’s outcome specifies that illiquidity time series analysis exhibits the asymmetric effect of directional change in return on illiquidity. Further, the study indicates a significant impact of illiquidity and decomposed illiquidity on conditional volatility. This suggests an asymmetric effect of illiquidity shocks on conditional volatility in the Indian stock market.Originality/valueThis study is one of the few studies that used the World Uncertainty Index (WUI) to measure liquidity and market risks as specified in the LCAPM. Further, the findings of the reverse impact of illiquidity and decomposed higher and lower illiquidity on conditional volatility confirm the presence of price informativeness and its immediate effects on illiquidity in the Indian stock market. The study strengthens earlier studies and offers new insights into stock market liquidity to clarify the association between liquidity and stock return for effective policy and strategy formulation that can benefit investors.

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Section: Measuring Liquidity and Stock Returnsmentioning

confidence: 99%

A new method for estimating liquidity and stock returns in Indian stock market

Sethy,

Tripathy

2024

CAFR

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“…There is some empirical evidence like those presented by (Virani & Kaur, 2015), (Reddy & Wong, 2016) or (Bai & Zhu, 2017) that shows the effect of this instrument on the liquidity of the market and its dependence of common market factors such as the interest rates and the risk premium. On the other hand, authors as (Dick, Rafferty, Toner, & Wright, 2017), (Nasieku & Wanyonyi, 2016) or (Wang, Cohen, & Glascock, 2018) show that the REITs influence the real estate industry, and through them, they affect other actual economic activities and variables. As the reader may see, the REITs are tax transparent and supposedly liquid financial instruments that may affect the real part of the economy through the size of its investments and its externalities.…”

Section: Introductionmentioning

confidence: 99%

¿Can the stock market boost economic growth?

Razo-De-Anda¹,

Aké²,

Venegas-Martı́nez³

2022

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This paper develops a stochastic dynamic general equilibrium model to assess the impact of Real Estate Investment Trust (REIT) in the growth rate of the real estate sector through direct investment in infrastructure. Based on the theoretical relationships that the model provides we show empirical evidence, through a quantile econometric analysis of time series, of the positive impact of the REITs in the construction sector. The growth in the construction sector comes from the demand for real estate by those trusts, which would lead to a price increase, promoting gross fixed capital formation, and increasing the value of output in the construction industry.

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Geographically Overlapping Real Estate Assets, Liquidity Spillovers, and Liquidity Multiplier Effects

Cited by 2 publications

References 40 publications

A new method for estimating liquidity and stock returns in Indian stock market

A new method for estimating liquidity and stock returns in Indian stock market

¿Can the stock market boost economic growth?

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