Information Asymmetries and Learning in Commercial Real Estate Markets

58 Pages Posted: 21 Aug 2017 Last revised: 24 Apr 2018

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Tien Foo Sing

National University of Singapore (NUS) - Department of Real Estate

Long Wang

ShanghaiTech University - School of Entrepreneurship and Management

Date Written: April 2018

Abstract

This paper empirically tests information asymmetries and learning in global commercial real estate markets. We find that foreign investors pay a premium of 3.6%, on average, relative to local investors for comparable properties in local markets. The premiums reflect information disadvantages of foreign investors, which are not correlated with the hiring of agents, anchoring to prices in their home market and selection bias. We show that learning from prior acquisition experience significantly reduces information disadvantages of foreign investors. Foreign investors could offset their initial disadvantages relative to the first-time local investors after four acquisition experiences in local markets. Quality of learning through more distant past acquisitions, acquisitions of real estate of the same type and in the same city could also reduce information asymmetries of foreign investors. However, we find that geographic proximity does not explain information asymmetries in cross-border investments experienced by foreign investors.

Keywords: Learning, Information Asymmetry, Foreign Investors, Commercial Real Estate Markets, Cross-border investments

JEL Classification: D82, F21, G15, R30

Suggested Citation

Agarwal, Sumit and Sing, Tien Foo and Wang, Long, Information Asymmetries and Learning in Commercial Real Estate Markets (April 2018). Available at SSRN: https://ssrn.com/abstract=3022705 or http://dx.doi.org/10.2139/ssrn.3022705

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Tien Foo Sing (Contact Author)

National University of Singapore (NUS) - Department of Real Estate ( email )

4 Architecture Drive
Singapore 117566
Singapore

Long Wang

ShanghaiTech University - School of Entrepreneurship and Management ( email )

No.393 Middle Huaxia Road
Pudong district
Shanghai, AK Shanghai 210201
China

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