Liquidity: A Review of Dimensions, Causes, Measures, and Empirical Applications in Real Estate Markets
Abstract
In this article, we consider how different dimensions of liquidity have been measured in financial markets and for various forms of real estate investment. The purpose of this exercise is to establish the range of liquidity measures that could be used for real estate investments before considering which measures and questions have been investigated so far. Most measures reviewed here are applicable to public real estate, but not all can be applied to private real estate assets or funds. Use of a broader range of liquidity measures could help real estate researchers tackle issues such as quantification of illiquidity premia for the real estate asset class or different types of real estate, and how liquidity differences might be incorporated into portfolio allocation models.