Time variation of liquidity in the private real estate market: An empirical investigation

Jim Clayton, Greg MacKinnon, Liang Peng

Research output: Contribution to journalArticlepeer-review

34 Scopus citations


This paper characterizes the behavior of and evaluates competing explanations for time variation in private real estate market liquidity. In the first, sellers base their estimates of value on observations of signals from the market. The second incorporates the option value of waiting or the opportunity cost of not transacting into seller's optimal valuation strategy. In the third, we allow for the possibility of investors who are not fully rational in the sense that they trade on market sentiment and we link market-wide liquidity to investor sentiment. In this model, measures of aggregate liquidity act as an indicator of the relative presence (or absence) of sentiment-based traders in the market and therefore the divergence of asset price from fundamental value. Empirical findings are generally consistent with models of optimal valuation with rational updating and provide support for the opportunity cost approach.

Original languageEnglish (US)
Pages (from-to)125-160
Number of pages36
JournalJournal of Real Estate Research
Issue number2
StatePublished - Apr 2008

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance (miscellaneous)


Dive into the research topics of 'Time variation of liquidity in the private real estate market: An empirical investigation'. Together they form a unique fingerprint.

Cite this