Dr. Sunderman published in Journal of Real Estate Research

For release:  May 3, 2016

Dr. Mark Sunderman, Morris Fogelman Real Estate Chair of Excellence and professor of finance, recently had an article accepted for publication in the Journal of Real Estate Research. The article is entitled "REITs and Market Microstructure: A Comprehensive Analysis of Market Quality." Dr. Sunderman co-authored this paper with two former finance Ph.D. students, Dr. Pawan Jain, Central Michigan University, and K. Janean Westby-Gibson.

In this study, the authors document the market quality differences between REIT and non-REIT common stocks prior to, during, and after the 2008 financial crisis. They also present the differences in the intraday trading patterns between REITs and non-REIT common stocks. Prior to the 2008 financial crisis, they find that REITs have significantly poorer stock market quality, as documented by lower liquidity, higher price volatility, higher price impact, and lower trading activity, than non-REIT common stocks. However, the 2008 financial crisis dramatically improved the market quality for REITs. They find that, during the post-crisis period, REITs have higher liquidity, lower volatility, lower price impact, and greater trading activity than non-REIT stocks. Overall, their results suggest that REITs have increased in liquidity during the post-crisis period. Additionally, their volatility and cost of trading has declined significantly making them an attractive vehicle for adding diversification to investor portfolios. This is reflected by increased trading activity in REITs during the post-crisis period. Further, the author's analysis of intraday patterns indicates that it is preferable to trade REIT stocks during the closing hour of the trading day when the liquidity is higher, volatility is lower, and the price impact is smaller as compared to the opening session of a trading day. Therefore, by appropriately timing the trades, a trader can minimize transaction costs and improve execution quality.