In alternate investment we are taught that risk of real estate lies between bonds and equity. However in economics and investment markets chapter of portfolio management cfa level 2 , we add a liquidity premium to the required return by equity investors which makes the risk more than equity.
These two statements are contradictory, please clarify.
The two discussions are completely different from each other. You take an illiquid stock……you’ll have to add a liquidity premium there as well.
Empirical evidence suggests that private equity real estate is riskier than bonds. Although real estate leases offer income streams somewhat like bonds, the income expected when leases renew can be quite uncertain and depend on market conditions at that time, which is unlike the more certain face value of a bond at maturity.