Commercial Real Estate, Information Production and Market Activity

Downs, David H.
Güner, Zehra Nuray
This paper addresses several issues related to the production of information across commercial real estate markets. The purpose is to determine the extent to which factors of production might complement or substitute for one another. A simple model is presented to illustrate the potential trade-offs between appraisal- and transactions-based information production. A series of empirical tests are performed on a panel data set constructed for 51 markets covering 9 years, 2001 through 2009. The number of commercial appraisers (i.e., certified general appraisers) and the number of commercial property transactions are used as proxies for information production. Overall, the results support the substitution hypothesis. Additional analyses examine a broader definition of appraisal-based information production, as well as the influence of market transparency on the main findings of this paper. Findings based on these additional analyses indicate that the trade-off between appraisal- and transactions-based information production is more pronounced in transparent markets. We conclude that appraisal-based information as a factor of production is, potentially, most critical in markets or conditions where the information environment is incomplete (i.e., transactions are scarce or the information regarding transactions is not public).


Information Producers and Valuation: Evidence from Real Estate Markets
Downs, David H.; Güner, Zehra Nuray (Springer Science and Business Media LLC, 2012-01-01)
This paper examines valuation and its relation to information production by licensed appraisers across real estate markets. The testable implications are discussed for either a peer monitoring or a crowding out effect in the data. The empirical model is estimated with data for all 50 US states and DC covering the sample period from 1999 to 2008. While analysis is primarily cross-sectional and not causal, the evidence is consistent with theory stating that the minimum quality associated with residential lice...
Investment analysis, price formation and neglected firms: Does real estate make a difference?
Downs, DH; Güner, Zehra Nuray (Wiley, 2000-12-01)
This paper examines the relation between information-gathering activities and price formation when the gatherers are small in number. Two measures of information asymmetry are estimated to test the cross-sectional effect of investment-analyst attention on price formation. The analysis contrasts firms that invest predominately in real estate assets to those that do not. Unlike most studies of the competition among information gatherers, the results in this paper indicate that liquidity worsens with increasin...
Interim efficient auctions with interdependent valuations
Küçükşenel, Serkan (Springer Science and Business Media LLC, 2012-05-01)
We provide a characterization of interim efficient auctions and examine their properties in the presence of informational interdependent valuations. We show that buyers can be awarded the auctioned item less often than the efficient level. We also show that buyers obtain the item more often as the degree of heterogeneity in preferences increases, even though profitability of trade does not depend on the heterogeneity in preferences.
Tracking the Evolution of Idiosyncratic Risk and Cross-Sectional Expected Returns for US REITs
Cakici, Nusret; Erol, Işıl; Tirtiroglu, Dogan (Springer Science and Business Media LLC, 2014-04-01)
This paper adopts the methodology in Bali and Cakici (Journal of Financial & Quantitative Analysis, 43, 29-58, 2008) in tracking the evolution of the relation between equity REITs' idiosyncratic risk and their cross-sectional expected returns between 1981 and 2010. In addition to the full sample period, we study this relation for (i) January 1981-December 1992, (ii) January 1993-September 2001, (iii) November 2001-August 2008 and (iv) November 2001-December 2010 and produce empirical results for (i) all sam...
Is the information deficiency in real estate evident in public market trading?
Downs, DH; Güner, Zehra Nuray (Wiley, 1999-09-01)
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 ...
Citation Formats
D. H. Downs and Z. N. Güner, “Commercial Real Estate, Information Production and Market Activity,” JOURNAL OF REAL ESTATE FINANCE AND ECONOMICS, pp. 282–298, 2013, Accessed: 00, 2020. [Online]. Available: