Liquidity Risk of Private Assets: Evidence from Real Estate Markets
26 Pages Posted: 11 Oct 2013
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Liquidity Risk of Private Assets: Evidence from Real Estate Markets
Date Written: November 2013
Abstract
Investment in thinly traded private assets involves liquidity risk. Existing literature provides limited guidance as it mainly focuses on publicly traded security assets such as stocks and bonds. This paper develops an analytical tool for quantifying liquidity risk of private assets. Using commercial real estate as a model asset and under reasonable assumptions, we find that the magnitude of liquidity risk is too large to be ignored, especially in down markets when liquidity risk is a great concern.
Keywords: illiquidity, liquidity risk, thinly traded private asset
JEL Classification: G11, G32, R3
Suggested Citation: Suggested Citation
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