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Testing for Information Asymmetries in Real Estate Markets

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Listed:
  • Pablo Kurlat
  • Johannes Stroebel

Abstract

In housing markets, neighborhood characteristics are a key source of information heterogeneity: sellers are usually better informed about neighborhood values than buyers are, but some sellers and buyers are better informed than their peers are. Consistent with predictions from a new framework for analyzing such markets with heterogeneous assets and differentially informed agents, we find that changes in the composition of sellers toward more informed sellers and sellers with a larger supply elasticity predict subsequent house price declines. This effect is larger for houses with more price exposure to neighborhood characteristics, and smaller for houses bought by buyers that are more informed.

Suggested Citation

  • Pablo Kurlat & Johannes Stroebel, 2015. "Testing for Information Asymmetries in Real Estate Markets," The Review of Financial Studies, Society for Financial Studies, vol. 28(8), pages 2429-2461.
    • Handle: RePEc:oup:rfinst:v:28:y:2015:i:8:p:2429-2461.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhv028
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    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
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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