Liquidity risk and cross-sectional return in the housing market

Empirical analysis of the illiquidity premia of German real estate securities

“…Many studies have identified positive correlations between returns and illiquidity for real estate investments (Benveniste et al 2001;Zheng et al 2015). In line with theoretical expectations, Ametefe et al (2016) find liquidity risk to be generally lower for REITs than for other equities.…”

Empirical Analysis of the Illiquidity Premia of German Real Estate Securities

“…Many studies identify positive correlations between returns and illiquidity for real estate investments (see Benveniste et al, 2001;Zheng et al, 2015). In line with theoretical expectations, they find liquidity risk to be generally lower for REITs than for other equities (Ametefe et al, (2016).…”

An Improved Approach for Constructing the Real Estate Price Index with Bargaining Effect

“…Sellers want money and sell their assets to buyers, while buyers bring money or liquidity into the market (Dijk, Geltner, & Minne, 2018). The relative movement of sellers' and buyers' reservation prices over time shows the transaction volume or liquidity (Fisher et al, 2003;Genesove, 2012;Zheng, Chau, & Eddie, 2015;Gong, Zhang, & Zhao, 2018). Specifically, in upward market period the increase of sellers' and buyers' reservation prices drives the increase of the transaction price, while the greater increase of buyers' reservation price than that of buyers leads to more trading or liquidity; Similarly, in downward market the decrease of sellers' and buyers' reservation prices reduces the transaction price, while the greater decrease of buyers' reservation price than that of sellers results in less trading or liquidity (Gong et al, 2018).…”

“…The "constant liquidity" represents a special case that the sellers match the change of buyers' reservation prices, then the transaction volume or liquidity will be equal over time, and the transaction price change is tracked by the buyer reservation price index. To achieve a deal, the buyers' reservation price should be larger than that of sellers (Fisher et al, 2003;Zheng et al, 2015;Lin & Vandell, 2007), since the reservation prices of sellers and buyers are the minimum and maximum prices that they are willing to accept in a transaction, respectively. In the construction process of Fisher et al (2003), the transaction price is assumed at the midpoint between buyers' and sellers' reservation price.…”