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The Growing Importance of Secondary Market Activities for Open-end Real Estate Fund Shares in Germany

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Listed:
  • Philipp Gerlach

    (Goethe University)

  • Raimond Maurer

    (Goethe University)

Abstract

Shares of open-end real estate funds are typically traded directly between the investor and the fund management company. However, we provide empirical evidence for the growth of secondary market activities, i.e., the trading of shares on stock exchanges. We find high trading levels in situations where the fund management company suspends the issue or redemption of shares. Shares trade at a discount when the fund management company suspends the redemption, whereas shares trade at a premium when the fund management company suspends the issue. We also find evidence that secondary market trading activity is increasing since German regulation introduced a minimum holding period and a mandatory notice period for open-end real estate funds.

Suggested Citation

  • Philipp Gerlach & Raimond Maurer, 2020. "The Growing Importance of Secondary Market Activities for Open-end Real Estate Fund Shares in Germany," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 72(1), pages 65-106, February.
    • Handle: RePEc:spr:schmbr:v:72:y:2020:i:1:d:10.1007_s41464-019-00081-y
    DOI: 10.1007/s41464-019-00081-y
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    References listed on IDEAS

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    1. Steffen Sebastian & Marcel Tyrell, 2006. "Open End Real Estate Funds - Diamonds Or Danger?," ERES eres2006_301, European Real Estate Society (ERES).
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    4. Fecht, Falko & Wedow, Michael, 2014. "The dark and the bright side of liquidity risks: Evidence from open-end real estate funds in Germany," Journal of Financial Intermediation, Elsevier, vol. 23(3), pages 376-399.
    5. Christian Weistroffer & Steffen Sebastian, 2015. "The German Open-End Fund Crisis – A Valuation Problem?," The Journal of Real Estate Finance and Economics, Springer, vol. 50(4), pages 517-548, May.
    6. Jennifer Huang & Kelsey D. Wei & Hong Yan, 2007. "Participation Costs and the Sensitivity of Fund Flows to Past Performance," Journal of Finance, American Finance Association, vol. 62(3), pages 1273-1311, June.
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    More about this item

    Keywords

    Open-end real estate funds; Secondary market; Trading restrictions; NAV-price-spread;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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