The Distribution of REIT Liquidity
34 Pages Posted: 5 Jun 2013 Last revised: 1 Feb 2016
Date Written: June 4, 2013
In this study, we examine the distribution of market liquidity for a broad sample of Real Estate Investment Trusts (REITs). While prior research has focused on the average liquidity of REITs, we extend our analysis to include both the variability and skewness of liquidity, both of which have important implications. In extreme cases, excess variability in liquidity could present future uncertainty about the level of liquidity for REIT investors and the increased skewness of liquidity is indicative of increased competition among market makers. Our multivariate tests show that, consistent with prior literature, average bid-ask spreads are higher for the REITs than for non-REITs. We also find that the variability of bid-ask spreads is larger for REITs than for non-REITs. In addition, we find that the skewness of REIT bid-ask spreads has not only increased across time, but has also increased at a greater rate than the skewness of non-REIT spreads.
Keywords: REITs, Liquidity
Suggested Citation: Suggested Citation