Working Paper: NBER ID: w8877
Authors: Mark J. Garmaise; Tobias J. Moskowitz
Abstract: This paper studies the role of asymmetric information in commercial real estate markets in the U.S. We propose a novel and exogenous measure of information based on the quality of property tax assessments in different regions. Employing direct and indirect information variables, we find strong evidence that information considerations are significant in this market. We show that market participants resolve information asymmetries by purchasing nearby properties, trading properties with long income histories, and avoiding transactions with informed professional brokers. The evidence that the choice of financing is used to address information concerns is mixed and weak.
Keywords: No keywords provided
JEL Codes: G2; G3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Quality of property tax assessments (H71) | Market behavior (D40) |
| Quality of property tax assessments (H71) | Informed decisions by market participants (G14) |
| Informed decisions by market participants (G14) | Reduced information asymmetries (D82) |
| Market participants resolve information asymmetries (D82) | Purchase nearby properties (R33) |
| Market participants resolve information asymmetries (D82) | Trade properties with long income histories (G19) |
| Perceived information asymmetry (D83) | Avoid transactions with informed professional brokers (G24) |
| Financing choices (G32) | Address information concerns (R38) |