REITs and Market Friction

37 Pages Posted: 3 Oct 2011 Last revised: 5 Jun 2014

See all articles by Benjamin M. Blau

Benjamin M. Blau

Utah State University - Huntsman School of Business

Jared F. Egginton

Boise State University - College of Business & Economics

Matthew D. Hill

Arkansas State University

Date Written: March 3, 2014

Abstract

We examine the Hou and Moskowitz (2005) parsimonious measure of friction, which proxies investors’ difficulty in incorporating market-wide information into security prices. Our comparison of REITs and matched non-REIT stocks shows a statistical and economically higher level of friction for REIT securities. This finding suggests that REIT securities react more slowly to new information. Thus, our evidence does not support the view that REITs are more transparent than non-REITs, at least with respect to price delay. Further results indicate that the primary drivers for the REIT-delay differential include differences in size, turnover, volatility, and price level. Examining within-REIT differences in delay, we find a positive and significant relation between delay and whether the REIT is part of an operating partnership. We find only marginal differences in delay across property focus.

Keywords: REITs, price delay, market frictions, microstructure

Suggested Citation

Blau, Benjamin M. and Egginton, Jared Frank and Hill, Matthew D., REITs and Market Friction (March 3, 2014). Available at SSRN: https://ssrn.com/abstract=1937598 or http://dx.doi.org/10.2139/ssrn.1937598

Benjamin M. Blau

Utah State University - Huntsman School of Business ( email )

3500 Old Main Hill
Logan, UT 84322
United States

Jared Frank Egginton

Boise State University - College of Business & Economics ( email )

United States
2084264586 (Phone)

Matthew D. Hill (Contact Author)

Arkansas State University ( email )

2713 Pawnee
P.O. Box 1750
Jonesboro, AR 72467-115
United States

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