The Liquidity Risk of REITs

DiBartolomeo, Jeffrey A.; Gatchev, Vladimir A.; Harrison, David M.

doi:10.1080/08965803.2021.1889288

Cited by 10 publications

(6 citation statements)

References 59 publications

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“…Real estate is -0.03 while healthcare, at -0.5, is the only other negative and significant loading. This lends some weight to the findings by Subrahmanyam (2007) and DiBartolomeo et al (2020) that the REIT and non-REIT markets are affected differently by liquidity shocks.…”

Section: Performance Of the Fund Industrymentioning

confidence: 59%

“…None of the above benchmarks explicitly considers liquidity. However, DiBartolomeo et al (2020), in their analysis of the liquidity risk of REITs, use a liquidity measure proposed by Pástor and Stambaugh (2003). This risk factor captures liquidity related to temporary price fluctuations induced by order flow, and represents the market-wide systematic measure for liquidity fluctuations.…”

Section: Literature Reviewmentioning

confidence: 99%

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Performance and Market Maturity in Mutual Funds: Is Real Estate Different?

Macgregor

Schulz

Zhao

2020

J Real Estate Finan Econ

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Despite the lack of convincing evidence that active investment fund managers add value, the number of actively-managed US mutual funds has increased substantially over the last 25 years. While non-sector diversified mutual funds have received much attention, sector funds, except real estate mutual funds (REMFs), have not. In this paper, we provide new and more robust evidence on the performance of active REMFs compared to all actively managed mutual funds. We use the Carhart four-factor model with an additional liquidity factor as a risk-adjusted benchmark. We use wild bootstrap methods to deal with small samples, non-normality and heteroscedasticity, and we control for the false discovery of significant results. For portfolios of fund types, we find evidence of both significant outperformance and underperformance, net of fees, during 1992-2016. We consider non-overlapping five-year and three-year periods and find very limited evidence of persistent outperformance. For individual funds, we find that, for both sector and diversified funds, net of fees, only 0.79% are skilled. We find persistence in skills for only two individual fund managers of diversified funds. We investigate the effects of the outsourcing of management and of team versus individual management. Outsourcing has no effect on performance of non-RE sector funds but, for cap-based funds and style-based funds, it has a negative effect. There is some evidence that this may also be true for REMFs. Team management has no effect for any types of funds. Overall, we conclude that REMFs are generally no different from other sector funds.

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Section: Performance Of the Fund Industrymentioning

confidence: 59%

Section: Literature Reviewmentioning

confidence: 99%

Performance and Market Maturity in Mutual Funds: Is Real Estate Different?

Macgregor

Schulz

Zhao

2020

J Real Estate Finan Econ

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“…We note that they do not examine how macro factors affect stock liquidity as it relates to returns. However, DiBartolomeo, Gatchev, and Harrison (2021) examine REIT liquidity and find that REITs exhibit a negative sensitivity to market wide liquidity shocks. That is, when liquidity declines in the broader stock market, publicly traded real estate prices tend to increase relative to the broader stock market.…”

Section: Real Estate Frameworkmentioning

confidence: 99%

Macroeconomic Uncertainty and Predictability of Real Estate Returns: The Impact of Asset Liquidity

Price,

Nayar,

Shen

2023

29th Annual European Real Estate Society Conference

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“…In addition, the liquidity risks of REITs are examined using a sample of 440 REITs for the period 1980(DiBartolomeo, et al, 2021. The results are classified into four groups:…”

Section: Literature Reviewmentioning

confidence: 99%

The influence of financial indicators on liquidity: An empirical analysis of profitability, leverage, and fund age

Cicmil

2023

Ekonomika

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Financial leverage, profitability, and liquidity are crucial metrics used to evaluate the financial health and stability of a firm. This study aims to investigate the relationship between leverage ratios (debt-to-equity and debt-to-asset), profitability ratio( ROE), Fund Age and liquidity ratios (cash ratio and quick ratio) for Residential Real Estate Investment Trusts (REITs) listed on the New York Stock Exchange (NYSE) over the period of 2009-2021. A multiple linear regression analysis was conducted to model the relationship between the independent variables and the dependent variables. The findings suggest that ROE has a significant positive relationship with liquidity ratios, while Debt to Equity and Fund Age have a significant negative relationship. Debt to Assets is found to be not statistically significant in explaining liquidity, further highlighting the complex nature of the relationship between financial metrics and the financial stability of a firm.

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The Liquidity Risk of REITs

Cited by 10 publications

References 59 publications

Performance and Market Maturity in Mutual Funds: Is Real Estate Different?

Performance and Market Maturity in Mutual Funds: Is Real Estate Different?

Macroeconomic Uncertainty and Predictability of Real Estate Returns: The Impact of Asset Liquidity

The influence of financial indicators on liquidity: An empirical analysis of profitability, leverage, and fund age

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