Empirical Analysis of the Illiquidity Premia of German Real Estate Securities

Paul, Thomas; Walther, Thomas; Küster-Simic, André (2021): Empirical Analysis of the Illiquidity Premia of German Real Estate Securities, in: Financial Markets and Portfolio Management, forthcoming.

83 Pages Posted: 25 Sep 2020 Last revised: 8 May 2021

See all articles by Thomas Paul

Thomas Paul

HSBA Hamburg School of Business Administration

Thomas Walther

Utrecht University - School of Economics

Andre Kuester Simic

Hamburg School of Business Administration

Date Written: July 1, 2020

Abstract

In this study, we analyze illiquidity premia and their effect on the expected returns of German real estate securities. To this end, we use a unique data set that includes real estate stocks, real estate investment trusts (REITs), and open- and closed-end real estate funds for 2003 to 2017. We follow Amihud‘s (2002) structural approach; specifically, we estimate Amihud‘s illiquidity factors, investigate the relationships between expected returns and illiquidity, and analyze the effects of expected and unexpected market illiquidity on future returns. We show that illiquidity plays an important role in expected REITs; however, it has less-clear effects on open- and closed-end funds. We found that the adjusted ILLIQ includes appropriate correction factors for securities with low trading activity and is a useful improvement. We also find evidence of structural breaks in the relationship between returns and illiquidity.

Keywords: Asset Pricing, Real Estate, REITs, Risk Factors, Illiquidity

JEL Classification: G11, G12, G14

Suggested Citation

Paul, Thomas and Walther, Thomas and Kuester Simic, Andre, Empirical Analysis of the Illiquidity Premia of German Real Estate Securities (July 1, 2020). Paul, Thomas; Walther, Thomas; Küster-Simic, André (2021): Empirical Analysis of the Illiquidity Premia of German Real Estate Securities, in: Financial Markets and Portfolio Management, forthcoming., Available at SSRN: https://ssrn.com/abstract=3688991 or http://dx.doi.org/10.2139/ssrn.3688991

Thomas Paul (Contact Author)

HSBA Hamburg School of Business Administration ( email )

Adolphsplatz 1
Hamburg, 20457
Germany

Thomas Walther

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, +31 30 253 7373 3584 EC
Netherlands

HOME PAGE: http://www.thomas-walther.info

Andre Kuester Simic

Hamburg School of Business Administration ( email )

Alter Wall 38
Hamburg, 20457
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
51
Abstract Views
556
rank
543,868
PlumX Metrics