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Information-Based Trade in German Real Estate and Equity Markets

Author

Listed:
  • Marco Wölfle

    (Center for Real Estate Studies, Steinbeis University Berlin, Eisenbahnstrasse 56, 79098 Freiburg, Germany)

Abstract

This paper employs four established market microstructure measures on information-based trade in financial markets. A set of German mid and small caps is used to analyze potential differential information content in real estate stocks compared to other asset classes. After linking substantially lower amounts of information-based trade in real estate stocks to higher liquidity premia, it is found that the evolution of the information content in real estate and other assets follows similar trends. Consequently, interdependence is tested for rolling time windows, revealing strong informational links between real estate and other assets. Particularly, small caps, financials, as well as companies offering consumer goods and services show a close relationship to real estate. Depending on the choice of the measure of information-based trade, up to 75% of the variation in the information content in real estate shares is related to other asset classes, pointing to the notion of high dependence.

Suggested Citation

  • Marco Wölfle, 2015. "Information-Based Trade in German Real Estate and Equity Markets," Risks, MDPI, vol. 3(4), pages 1-26, December.
    • Handle: RePEc:gam:jrisks:v:3:y:2015:i:4:p:573-598:d:60148
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    information-based trade; real estate; illiquidity; roll; D53; D82; G14; R30;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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