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Is the Information Deficiency in Real Estate Evident in Public Market Trading?
Author(s) -
Downs David H.,
Güner Z. Nuray
Publication year - 1999
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00782
Subject(s) - real estate , market liquidity , economics , information asymmetry , financial economics , public information , empirical evidence , microeconomics , monetary economics , finance , computer science , philosophy , internet privacy , epistemology
This paper examines the summary informativeness of trading in real estate securities. Prior literature on publicly traded real estate securities suggests that the information deficiency associated with local economies and unique rent dynamics will manifest itself as severe information asymmetry. To date, most studies concerned with these issues have focused on the conventional measures of liquidity (serial correlations, bid—ask spreads, etc.). However, the conventional measures have several shortcomings as pure measures of trading information. To address this issue, we use a vector autoregressive methodology pioneered by Hasbrouck. We examine the empirical proposition that information‐gathering activities are related to trade informativeness. The evidence is consistent with a theoretical model in which traders are risk‐averse and the number of information gatherers is small.