Internal Liquidity Risk in REIT Excess Returns
32 Pages Posted: 19 Aug 2009 Last revised: 17 Nov 2009
Date Written: August 18, 2009
Abstract
Because REITs distribute most taxable income to shareholders, internal liquidity is important for REIT investment decisions. We employ American REIT data to investigate the effects of internal liquidity risk on REIT excess returns. Our firm-level results show that internal liquidity risk positively relates to REIT excess returns when controlling for variables possibly affecting REIT returns. Besides, our results show that internal liquidity risk effects are stronger for REITs with smaller size and higher leverage ratio. We also find that an industry-wide internal liquidity risk state variable materially explains aggregated REIT excess returns when controlling for bond and equity market risk factors and other major state variables. We conclude that internal liquidity risk should be incorporated into REIT pricing.
Keywords: Internal Liquidity risk, REIT excess returns, Internal Liquidity State Variable
JEL Classification: G12
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Explaining the Rate Spread on Corporate Bonds
By Edwin J. Elton, Martin J. Gruber, ...
-
The Determinants of Credit Spread Changes
By Pierre Collin-dufresne, J. Spencer Martin, ...
-
How Much of Corporate-Treasury Yield Spread is Due to Credit Risk?
By Jing-zhi Huang and Ming Huang
-
How Much of the Corporate-Treasury Yield Spread is Due to Credit Risk?
By Jing-zhi Huang and Ming Huang
-
How Much of the Corporate-Treasury Yield Spread is Due to Credit Risk?
By Jing-zhi Huang and Ming Huang
-
Corporate Yield Spreads: Default Risk or Liquidity? New Evidence from the Credit-Default Swap Market
By Francis A. Longstaff, Sanjay Mithal, ...
-
Equity Volatility and Corporate Bond Yields
By John Y. Campbell and Glen B. Taksler
-
Equity Volatility and Corporate Bond Yields
By John Y. Campbell and Glen B. Taksler
-
Structural Models of Corporate Bond Pricing: An Empirical Analysis
By Young Ho Eom, Jing-zhi Huang, ...
-
By Roberto Blanco, Simon Brennan, ...