Confronting Information Asymmetries: Evidence from Real Estate Markets

Mark J. Garmaise, Tobias J. Moskowitz

NBER Working Paper No. 8877
Issued in April 2002
NBER Program(s):   AP   CF

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.

(352 K)

Published: Garmaise, Mark J. and Tobias J. Moskowitz. "Confronting Information Asymmetries: Evidence From Real Estate Markets," Review of Financial Studies, 2004, v17(2,Summer), 405-437.

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