Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/16600
Title: Liquidity risk and cross-sectional return in the housing market
Authors: Zheng, X
Chau, KW
Hui, ECM 
Keywords: Asset pricing test
Hong Kong housing market
Housing return
Liquidity risk
Issue Date: 2015
Publisher: Pergamon Press
Source: Habitat international, 2015, v. 49, p. 426-434 How to cite?
Journal: Habitat international 
Abstract: The role of liquidity in asset pricing model has attracted much attention in recent financial literature. However there is a paucity of studies on liquidity and asset pricing in the real estate market. It is expected that as the housing market is less liquid than the stock market, it should incur more significant illiquid effects. Motivated by such intuition, this paper carries out an asset pricing analysis that investigates the role of liquidity risk in explaining cross-sectional housing returns. Using a unique database of 55 popular housing estates, the study reveals that housing estates with a high sensitivity to market liquidity command a higher risk premium. Such positive relationship between expected return and liquidity beta is proved robust under different model specifications. The findings of this study not only shed new light on the positive price-volume correlation and the cross-sectional liquidity-return relationship in the financial literature, but also provide useful implications for real estate investment.
URI: http://hdl.handle.net/10397/16600
ISSN: 0197-3975
EISSN: 1873-5428
DOI: 10.1016/j.habitatint.2015.06.012
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