Geographically Overlapping Real Estate Assets, Liquidity Spillovers, and Liquidity Multiplier Effects

32 Pages Posted: 18 Apr 2018 Last revised: 23 May 2018

See all articles by Chongyu Wang

Chongyu Wang

Concordia University; University of Florida

Jeffrey Cohen

University of Connecticut - School of Business

John L. Glascock

University of Connecticut - School of Business - Center for Real Estate and Urban Economic Studies; European Business School

Date Written: April 1, 2018

Abstract

When liquidity providers for one asset obtain information from other asset prices, this may magnify the (upward or downward) comovement of asset liquidity. It also may yield an illiquidity multiplier. We empirically test the magnitude of this illiquidity multiplier for a sample of U.S. equity real estate investment trusts (REITs) using spatial autoregressive models. We find significant liquidity spillovers among REITs with geographically overlapping real estate holdings. Our findings suggest that the multiplier effect impacts neighboring REITs through cross-asset learning about firm fundamentals. This effect is stronger during market turmoil, after the Decimalization (a source of exogenous variation), and for REITs headquartered in MSAs with less information asymmetry.

Keywords: Liquidity Spillovers, Liquidity Multiplier, Real Estate

JEL Classification: G01, G11, G14

Suggested Citation

Wang, Chongyu and Cohen, Jeffrey and Glascock, John L., Geographically Overlapping Real Estate Assets, Liquidity Spillovers, and Liquidity Multiplier Effects (April 1, 2018). University of Connecticut School of Business Research Paper No. 18-18, Available at SSRN: https://ssrn.com/abstract=3154088 or http://dx.doi.org/10.2139/ssrn.3154088

Chongyu Wang (Contact Author)

Concordia University ( email )

1450 Guy Street
Montreal, Quebec H3G 1A1
Canada

University of Florida ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

Jeffrey Cohen

University of Connecticut - School of Business ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

John L. Glascock

University of Connecticut - School of Business - Center for Real Estate and Urban Economic Studies ( email )

Storrs, CT 06269
United States

European Business School ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, Hessen 65189
Germany

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