Dynamics of Asset Prices and Transaction Activity in Illiquid Markets: the Case of Private Commercial Real Estate

Dynamics of Asset Prices and Transaction Activity in Illiquid Markets: the Case of Private... This paper investigates the relationship between capital flows, turnover and returns for the UK private real estate market. We examine a number of possible implications of capital flows and turnover on capital returns testing for evidence of a price pressure effect, ‘return chasing’ behaviour and information revelation. The main tool of analysis is a panel vector autoregressive (VAR) regression model in which institutional capital flows, turnover and returns are specified as endogenous variables in a two equation system in which we also control for macro-economic variables. Data on flows, turnover and returns are obtained for the ten market segments covering the main UK commercial real estate sectors. Our results do not support the widely-held belief among practitioners that capital flows have a ‘price pressure’ effect on property prices. However, we do find a significant positive relationship between lagged turnover and contemporaneous capital returns, suggesting that asset turnover provides increased price revelation which, in turn, reduces investment risk and increases property values. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Dynamics of Asset Prices and Transaction Activity in Illiquid Markets: the Case of Private Commercial Real Estate

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Springer US
Copyright © 2009 by Springer Science+Business Media, LLC
Economics; Regional/Spatial Science; Financial Services
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