Liquidity dynamics across public and private markets

Bond, Shaun A.; Chang, Qingqing

doi:10.1016/j.jimonfin.2012.05.020

Cited by 18 publications

(9 citation statements)

References 38 publications

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“…An interesting question that arises is whether these two trends are related. Bond and Chang (2012) find significant directional causality for most liquidity proxies from the public to private real estate markets, based on a Vector Autoregressive (VAR) Model. Their finding implies a spill over effect of liquidity drying up from the public to the private market.…”

Section: Reits Underlying Property Markets and Liquidity: A Firm Levmentioning

confidence: 99%

“…The authors document a premium of 12-22% increase in firm value by creating liquid equity claims on relatively illiquid property assets. Bond and Chang (2012) investigate cross-market liquidity between public and private real estate markets using several proxies for the liquidity. The authors find both markets share a generally similar trend in their liquidity.…”

Section: Liquidity Commercial Real Estate and Reits -Related Literaturementioning

confidence: 99%

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REITs, Underlying Property Markets and Liquidity: A Firm Level Analysis

Downs¹,

Zhu²,

Sing³

2019

26th Annual European Real Estate Society Conference

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This paper examines the impact of underlying property market liquidity on the liquidity of publicly traded REIT shares. Our analysis measures firm-level exposure to local, direct real estate market liquidity using the property allocation of each REIT. The findings show that property market liquidity can causally influence the liquidity of real estate securities. This is especially true during the crisis period, which confirms with the notion that illiquidity is transmitted from direct to indirect property markets. The results also reveal that the liquidity of a firm's assets can affect the liquidity of financial claims on the assets. The corporate investment decision, including the selection of a geographic market, can affect stock liquidity. Furthermore, we find that the sensitivity to underlying asset liquidity changes with the firm's credit constraint and investment opportunities. Small REITs, REITs with a lower cash interest coverage ratio, and REITs with a higher book-to-market ratio might choose to invest in more liquid property markets to improve their stock liquidity. Finally, we find that underlying asset liquidity is associated with REIT values.

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Section: Reits Underlying Property Markets and Liquidity: A Firm Levmentioning

confidence: 99%

Section: Liquidity Commercial Real Estate and Reits -Related Literaturementioning

confidence: 99%

REITs, Underlying Property Markets and Liquidity: A Firm Level Analysis

Downs¹,

Zhu²,

Sing³

2019

26th Annual European Real Estate Society Conference

View full text Add to dashboard Cite

show abstract

“…They also analyze cross-sectional determinants of liquidity as measured by dollar volume, and find that the market value of equity explains almost half the variation in dollar volume, but the statistical significance of this relation disappears when they include control variables for institutional ownership and property focus. Following from the evidence that REITs reflect partly equities and partly private real estate performances, Bond and Chang (2012) also study the cross-asset liquidity between these three markets/assets. In line with theoretical expectations, they find liquidity risk and commonality in liquidity to be generally lower for REITs than for other equities and causality going from public to private markets.…”

Section: Literature Reviewmentioning

confidence: 99%

Liquidity Pricing of Illiquid Assets

Marcato¹

2018

25th Annual European Real Estate Society Conference

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So far the main body of the asset pricing literature has computed liquidity risk premia for either markets or single assets. The vast majority of these studies have been focused on fairly liquid assets, but recently a greater attempt to price such an important component of asset pricing factors in markets with high illiquidity (especially in real estate) has also started to take place. The present paper brings these recent studies together, and estimates the liquidity premium of an illiquid asset (real estate) looking at three main aspects-time on market, liquidation bias and market liquidity-and using three main empirical models and several liquidity measures suggested in the literature. We find strong evidence of a high premium of around 3.0-3.5% that varies across sectors and periods. This estimation is robust to different measures of liquidity and model specifications.

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“…Excess returns on publicly traded REIT shares as well as the funding liquidity risk implied by a higher CMBS yield spread are positively correlated with private market excess returns. For instance, REITs invest in income-producing properties, thereby providing capital inflows to illiquid private property markets, which ensures additional market liquidity in the real estate sector (see, e.g., Bond and Chang (2012)). The degree of spatial dependence, as indicated by an estimated spatial lag of 0.414 (based on GMM), is slightly smaller compared to the result in Model I, since the degree of spatial dependence is partly absorbed by the common factor.…”

Section: Cross-sectional Dependence and Spillover Effectsmentioning

confidence: 99%