Real Estate Investment Trusts, Small Stocks, and Bid-Ask Spreads

(with Edward F. Nelling, James M. Mahoney and Terry L. Hildebrand)

Selected papers by Michael A. Goldstein are available on SSRN at http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=54604


Real Estate Economics




This study examines the liquidity of Real Estate Investment Trusts (REITs), as measured by their bid-ask spread. We find that REIT spreads have increased over the period 1986–1990, are inversely related to market capitalization, and are similar in magnitude to spreads on other stocks of comparable size. Analysis of variance tests indicate that REIT spreads are similar across equity, mortgage and hybrid asset types. Multivariate regression results indicate that market capitalization is the primary determinant of REIT bid-ask spreads, and spreads are larger for National Association of Securities Dealers Automated Quotations (NASDAQ) REITs than for New York Stock Exchange (NYSE) REITs. The regression results also indicate that spreads are lower for equity REITs than for mortgage or hybrid REITs, and are inversely related to the fraction of the REIT's shares held by institutional investors. The similarity between REIT spreads and those of other common stocks holds in both bull and bear real estate markets and suggests that, from a liquidity perspective, REITs are similar to other common stocks.


Finance and Financial Management | Portfolio and Security Analysis

Recommended Citation

Goldstein, Michael A., Edward F. Nelling, James M. Mahoney, Terry L. Hildebrand. 1999. "Real Estate Investment Trusts, Small Stocks, and Bid-Ask Spreads." Real Estate Economics 23, no. 1: 45-63.

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