Asymmetric or Incomplete Information about Asset Values?
96 Pages Posted: 17 Oct 2018 Last revised: 14 Mar 2019
Date Written: March 12, 2019
We provide a new framework for using text as data in empirical models. The framework identifies salient information in unstructured text that can control for multidimensional heterogeneity among assets. We demonstrate the efficacy of the framework by re-examining principal-agent problems in residential real estate markets. We show that the agent-owned premiums reported in the extant literature dissipate when the salient textual information is included. The results suggest the previously reported agent-owned premiums suffer from an omitted variable bias, which prior studies incorrectly ascribe to market distortions associated with asymmetric information.
Keywords: Asset pricing, Asymmetric Information, Omitted variable bias, Textual analysis
JEL Classification: D82, G14, R00
Suggested Citation: Suggested Citation