Confronting Information Asymmetries: Evidence from Real Estate Markets
Mark J. Garmaise
University of California, Los Angeles (UCLA) - Anderson School of Management
Tobias J. Moskowitz
AQR Capital; University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)
Center for Research in Security Prices (CRSP) Working Paper No. 507
This paper studies the role of asymmetric information in commercial real estate markets in the U.S. and Canada. We propose a novel and exogenous measure of information based on the quality of property tax assessments in different regions and time periods. Employing direct and indirect information variables, we find strong evidence that information considerations are significant in real estate. We show that market participants resolve information asymmetries by purchasing nearby properties and by avoiding trades with informed professional brokers. There is some indication that purchasers also make use of informed intermediaries. The evidence that the choice of financing is used to address information concerns is mixed and fairly weak.
Number of Pages in PDF File: 45
JEL Classification: R00
Date posted: February 3, 2000
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