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Asymmetric Information and the Predictability of Real Estate Returns

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  • Cooper, Michael
  • Downs, David H
  • Patterson, Gary A

Abstract

This article examines the relation between systematic price changes and the heterogeneity of investors' information sets in real estate asset markets. The empirical implications rely on a theoretical economy in which information asymmetry alters the dynamic relation between returns and trading volume. We employ a filter-rule methodology to determine predictability in returns and augment the return-based conditioning set with trading volume. The additional conditioning information is necessary since the model is underspecified when predictability is based on returns alone. Our results provide new insight into the coexistence of informational and noninformational exchange in the speculative markets for real estate assets. Specifically, we find that the predictability of real estate returns is generally more indicative of portfolio rebalancing effects than an adverse-selection problem. These results are unique in addressing the time-variation in information asymmetry. Copyright 2000 by Kluwer Academic Publishers

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  • Cooper, Michael & Downs, David H & Patterson, Gary A, 2000. "Asymmetric Information and the Predictability of Real Estate Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 20(2), pages 225-244, March.
    • Handle: RePEc:kap:jrefec:v:20:y:2000:i:2:p:225-44
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    Citations

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    Cited by:

    1. Jieting Chen & Yuichiro Kawaguchi, 2018. "A Revisit of the Cross-Section of Overnight and Intraday Abnormal Returns: Evidence from the Japanese REIT Market," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(1), pages 46-63, January.
    2. Hao Fang & Yen-Hsien Lee, 2013. "Are the Global REIT Markets Efficient by a New Approach?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(6), pages 743-757, December.
    3. Benjamas Jirasakuldech & Robert Campbell & John Knight, 2006. "Are There Rational Speculative Bubbles in REITs?," The Journal of Real Estate Finance and Economics, Springer, vol. 32(2), pages 105-127, March.
    4. repec:ire:issued:v:22:n:01:2019:p:85-110 is not listed on IDEAS
    5. Sulaiman T. Al-Abduljader, 2019. "Interdependence of Securitized Real Estate in Frontier Markets," International Real Estate Review, Global Social Science Institute, vol. 22(1), pages 83-108.
    6. Martin Hoesli & Stanimira Milcheva & Alex Moss, 2020. "Is Financial Regulation Good or Bad for Real Estate Companies? – An Event Study," The Journal of Real Estate Finance and Economics, Springer, vol. 61(3), pages 369-407, October.
    7. Beata Szetela & Grzegorz Mentel & Yuriy Bilan & Urszula Mentel, 2021. "The relationship between trend and volume on the bitcoin market," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(1), pages 25-42, March.
    8. Michael Cooper & David H. Downs, 1999. "Real Estate Securities and a Filter-based, Short-term Trading Strategy," Journal of Real Estate Research, American Real Estate Society, vol. 18(2), pages 313-334.

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