The Growing Importance of Secondary Market Activities for Open-End Real Estate Fund Shares in Germany
Schmalenbach Business Review
44 Pages Posted: 20 Sep 2018 Last revised: 27 Jan 2021
Date Written: January 22, 2020
Abstract
Shares of open-end real estate funds are typically traded directly between the investor and the fund management company. However, we provide empirical evidence for the growth of secondary market activities, i.e., the trading of shares on stock exchanges. We find high trading levels in situations where the fund management company suspends the issue or redemption of shares. Shares trade at a discount when the fund management company suspends the redemption, whereas shares trade at a premium when the fund management company suspends the issue. We also find evidence that secondary market trading activity is increasing since German regulation introduced a minimum holding period and a mandatory notice period for open-end real estate funds.
Keywords: Open-end Real Estate Funds, Secondary Market, Trading Restrictions, NAV-Price-Spread
JEL Classification: G11, G28, G29
Suggested Citation: Suggested Citation