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The liquidity measures for SREITs in 2005 are shown in Table 2.5. Panel A reports that the average daily percentage bid-ask spread across the sample is 0.81%, and the daily effective

19 _{We do not apply Roll’s measure in the comparison due to its potential bias caused by substantial amount of} positive serial covariances in the sample. We do not use Pastor and Stambaugh’s measure in the comparison due to insignificant, also non-existing, relationship with the bid-ask spread.

percentage spread is 0.80%. Both spreads roughly double those of JREITs: the average percentage bid-ask spread of JREITs in 2005 is 0.44% and the effective spread of JREIT is Table 2.4 Liquidity Comparison between JRETIs and Japanese non-REITs Stocks

The table presents the liquidity measures for JREITs and Japanese non-REITs stocks with comparable market capitalization. BA is the percentage bid-ask spread. EBA is the percentage effective half-spread. IBA is Roll’s measure, recorded in %. TO is the turnover ratio, expressed in %. VOL is the trading volume in million Japanese yen. Zero is the proportion of zero returns, expressed in %. AMIV is Amivest’s measure. AMIH is Amihud’s measure. P-values of the differences are recorded in parenthesis.

BA EBA TO VOL ZERO AMIV AMIH

Difference (2005) 0.01 0.05 -0.17 -265.8 5.2 0.91 -548.57

(0.675) (0.001) (0.000) (0.000) (0.000) (0.000) (0.000)

Difference (2006) 0.14 0.16 -0.2 -136.56 7.57 0.48 -307.59

(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)

Table 2.5 Liquidity Measures for SREITs

The table presents the liquidity measures for SREITs in 2005. Panel A presents summary statistics for the measures. Panel B reports the Pearson correlation coefficients between the percentage bid-ask spread and the alternative liquidity measures. BA is the percentage bid-ask spread. EBA is the percentage effective half-spread. IBA is Roll’s measure, recorded in %. TO is the turnover ratio, expressed in %. VOL is the trading volume in million Japanese yen. Zero is the proportion of zero returns, expressed in %. AMIV is Amivest’s measure. AMIH is Amihud’s measure. γ is the Pastor and Stambaugh’s measure. Standard deviations are recorded in brackets. *** denotes significance at 1% level.

BA EBA IBA VOL TO ZERO AMIV AMIH γ

Panel A: Summary Statistics

Mean 0.81 0.80 1.21 3.32 0.18 25.08 2226.11 2.725 0.114 [0.43] [0.22] [0.72] [3.93] [0.21] [10.94] [2009.31] [34.114] [0.32]

Panel B: Correlation with Bid-ask Spread

Correlation Coefficient 0.44*** -0.06 -0.44*** 0.20 0.5*** -0.18 0.37***

0.40%. The implied spread is 1.21%, which is 0.51% higher than that of JREITs. The differences in all three spreads are significant at 1% level. The comparison between the spreads of JREITs and SREITs indicates that the SREIT market has higher transactions costs. From the trading frequency aspect, the average turnover for SREITs is 0.18%. It is smaller than 0.27%, the

turnover ratio of JREITs. The average proportion of zero returns is about 25%, which is more than twice as much as that of JREITs. The differences in trading frequency are significant at 1% level.20 This implies that SREITs are traded less often than JREITs. As pointing out earlier, the overall SREIT market is much smaller than the JREIT market. Therefore, it is not surprise to see that SREITs are less liquid than JREITs.

Panel B of Table 2.5 shows the Pearson correlation coefficients between the percentage bid-ask spread and alternative liquidity measures. Only Roll’s measure and turnover ratio have significant and expected relationship with the bid-ask spread.

It is interesting to know whether SREITs have the similar liquidity as Singaporean non- REIT stocks. The daily data of Singaporean non-REIT stocks are obtained from SGX. There were publicly traded 696 common stocks in 2005. Since the sample of SREITs is rather small, we match the Singaporean common stocks to SREITs within +/- 5% of the average market capitalization of each SREIT in the sample. There are a total of 22 common stocks that satisfy the criterion. Among them, we select those that have been traded throughout the calendar year of 2005. As a result, 18 common stocks21 fit into the criteria. All five SREITs in the sample fit into the largest decile of non-REIT stocks. Table 2.6 shows the comparison of liquidity measures of SREITs and Singaporean common stocks. There is no significant difference in terms of bid-ask spreads and trading frequency between SREITs and non-REIT stocks. This implies that the transactions costs of SREITs are similar to non-REIT stocks, and SREITs are traded as often as non-REITs. However, in terms of price impact, both Amivest and Amihud’s measures of SREITs are significantly different those of non-REIT stocks. Both measures indicate that trading SREITs have less price impact than trading common stocks.

20 _{We do not compare the trading volume of SREITs to that of JREITs because of different currency.}

21 _{Actually, 19 stocks satisfied the conditions. However, one of them, Yeo Hiap Seng, Ltd., was not traded much in} 2005. Therefore, we exclude this stock so the number of matching stocks is eighteen.

Table 2.6 Liquidity Comparison between SRETIs and Singapore non-REITs Stocks

The table presents the liquidity measures for SREITs and Singapore non-REITs stocks with comparable market capitalization. BA is the percentage bid-ask spread. EBA is the percentage effective half-spread. IBA is Roll’s measure, recorded in %. TO is the turnover ratio, expressed in %. VOL is the trading volume in million Japanese yen. Zero is the proportion of zero returns, expressed in %. AMIV is Amivest’s measure. AMIH is Amihud’s measure. P-values of the differences are recorded in parenthesis.

BA EBA TO VOL ZERO AMIV AMIH

Difference (2005) 0.003 0.02 0.006 -0.48 2.26 0.2 -1088163

(0.94) (0.76) (0.88) (0.63) (0.39) (0.000) (0.001)