Professor Awarded Prize for Research on REIT Volatility and Liquidity

NAREIT and the American Real Estate and Urban Economics Association (AREUEA) awarded the 2015 NAREIT/AREUEA Real Estate Research Conference Distinguished Research Prize to Pawan Jain.

The conference was held at the New York Hilton Midtown on June 8.

Jain is an assistant professor of finance in the Department of Finance and Law at Central Michigan University.  His paper, J-REIT Market Quality: Impact of High Frequency Trading and the Financial Crisis, used data from the Japanese REIT market. However, his findings have “clear implications for other REIT markets, including in the U.S.,” according to Brad Case, NAREIT’s senior vice president for research and industry information.

Jain’s research focused on liquidity and volatility—specifically how they were affected by the financial crisis of 2008 to 2009 and the introduction of a new high-frequency trading (HFT) platform at the beginning of 2010.

“While many commentators have expressed fear that high-frequency trading may increase market volatility, Jain finds just the opposite:  The introduction of the HFT platform in Japan actually reduced volatility for Japanese REITs by increasing liquidity in the market,” Case said. He added that Jain’s research produced another interesting result: REITs were less affected than non-REIT companies both by the liquidity crisis and by the introduction of the HFT platform.

“That’s because REITs are generally more transparent than non-REIT companies and don’t withhold information from investors to the extent that non-REITs can, so pricing tends to be more efficient and market crises tend to present less disruption,” Case explained.

Jain’s J-REIT research complements earlier research that he and two co-authors released in 2013 showing that U.S. REITs tended to be less liquid than comparable non-REIT companies before the liquidity crisis, but have become more liquid than their non-REIT counterparts since the crisis.