Journal Article

Testing for Information Asymmetries in Real Estate Markets

Pablo Kurlat and Johannes Stroebel

in The Review of Financial Studies

Published on behalf of Society for Financial Studies

Volume 28, issue 8, pages 2429-2461
Published in print August 2015 | ISSN: 0893-9454
Published online May 2015 | e-ISSN: 1465-7368 | DOI: https://dx.doi.org/10.1093/rfs/hhv028
Testing for Information Asymmetries in Real Estate Markets

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  • Information, Knowledge, and Uncertainy
  • Housing Markets, Production Analysis, and Business Location
  • Financial Markets
  • Economics
  • Household Analysis

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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.

Keywords: G14; D53; D82; R21; R31

Journal Article.  13357 words.  Illustrated.

Subjects: Information, Knowledge, and Uncertainy ; Housing Markets, Production Analysis, and Business Location ; Financial Markets ; Economics ; Household Analysis

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