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Commercial Mortgage-Backed Securities (CMBS) and Market Efficiency with Respect to Costly Information

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Author Info

  • Andreas D. Christopoulos
  • Robert A. Jarrow
  • Yildiray Yildirim

Abstract

Commercial mortgage-backed securities (CMBS) are complex asset-backed securities trading in markets that do not currently use derivatives pricing technology. This lack of usage is due to the complexity of the modeling exercise, and only the recent and costly availability of historical data. As such, CMBS markets provide a natural environment for the testing of market efficiency with respect to this costly information. Using this information, this article develops a CMBS pricing model to provide a joint test of the model and market efficiency. Backtesting our pricing model for 4 years, although there is some evidence of abnormal trading profits, we cannot reject the efficiency of the CMBS markets. Copyright 2008 American Real Estate and Urban Economics Association

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Bibliographic Info

Article provided by American Real Estate and Urban Economics Association in its journal Real Estate Economics.

Volume (Year): 36 (2008)
Issue (Month): 3 (09)
Pages: 441-498

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Handle: RePEc:bla:reesec:v:36:y:2008:i:3:p:441-498

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Cited by:
  1. Jarrow, Robert A., 2011. "Credit market equilibrium theory and evidence: Revisiting the structural versus reduced form credit risk model debate," Finance Research Letters, Elsevier, vol. 8(1), pages 2-7, March.
  2. James Kau & Donald Keenan & Yildiray Yildirim, 2009. "Estimating Default Probabilities Implicit in Commercial Mortgage Backed Securities (CMBS)," The Journal of Real Estate Finance and Economics, Springer, vol. 39(2), pages 107-117, August.
  3. Driessen, Joost & Van Hemert, Otto, 2012. "Pricing of commercial real estate securities during the 2007–2009 financial crisis," Journal of Financial Economics, Elsevier, vol. 105(1), pages 37-61.
  4. Brent Ambrose & Yildiray Yildirim, 2008. "Credit Risk and the Term Structure of Lease Rates: A Reduced Form Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 37(3), pages 281-298, October.
  5. Yildiray Yildirim, 2008. "Estimating Default Probabilities of CMBS Loans with Clustering and Heavy Censoring," The Journal of Real Estate Finance and Economics, Springer, vol. 37(2), pages 93-111, August.

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