CHANGES IN REIT LIQUIDITY 1990-1994 - EVIDENCE FROM INTRADAY TRANSACTIONS

This study uses data on intra-day transactions to analyze whether real estate investment (REIT) liquidity as measured by the bid-ask spread changed from 1990 to 1994, a period during which the industry's market capitalization increased from $8.7 billion to $45 billion. REIT perce ntage spreads (spread as percentage of share price) narrowed significa ntly, primarily attributable to higher share prices rather than narrow er dollar-value spreads. An empirical model is used to analyze the det erminants of percentage spreads. Return variance and share price, not market capitalization are found to be the primary determinants of perc entage spreads in both periods. This suggests that the liquidity of RE IT securities is similar to that of non-REIT securities with similar p rices and return variance. In addition, percentage spreads are wider f or REITs trading on the NASDAQ.