题名

Liquidity and Adverse Selection: Evidence from the Five-Or-Fewer Rule Change

DOI

10.6293/AQAFA.2009.07.01

作者

Olgun Fuat Sahin；Pattarake Sarajoti

关键词

REIT ； Bid-ask spread ； Five-or-fewer rule

期刊名称

Advances in Quantitative Analysis of Finance and Accounting

卷期/出版年月

7期（2009 / 06 / 01）

页次

1 - 19

内容语文

英文
英文摘要

The REIT industry has experienced significant structural changes during the 1990s. Research has shown that the liquidity of REIT shares were significantly higher after 1993. At the same time, the market also observed greater ownership participation by institutional investors that occurred after the relaxation of the five-or-fewer rule. This paper aims to offer an explanation for the market microstructure developments in the REIT industry. Specifically, we investigate the effects of the five-or-fewer rule change on the liquidity and adverse selection component of the bidask spread of REIT shares. We find that the bid-ask spread narrows and the adverse selection component of the spread increases after the implementation of the rule change. Along with the evidence that the increase in institutional participation in the REIT industry also coincides with the implementation of the five-or-fewer rule change, we attribute the higher adverse selection component of the bid-ask spread to the market makers' compensation requirement for trading against informed investors. Overall, we find that the rule change effectively attracts the targeted investors, i.e. institutional investors.
主题分类 社會科學 > 經濟學
社會科學 > 財金及會計學
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