The Journal of Real Estate Finance and Economics
Volume 20, Issue 2, Article 8 (Abstract)
Title:	Asymmetric Information and the Predictability of Real Estate Returns
Author:	Michael Cooper, David H. Downs and Gary A. Patterson
Abstract:	This paper 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 co-existence of informational and non-informatinoal 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. Importantly, these results are unique in addressing the time-variation in information asymmetry.
Keywords:	Information, Predictability, Real Estate