There is no place like home: Information asymmetries, local asset concentration, and portfolio returns

Using a unique setting with significant cross‐market information asymmetries and a large sample of individual commercial property holdings, we provide robust evidence showing that local information plays a significant role in the linkage between local asset concentrations and return outperformance....

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Bibliographic Details
Published inReal estate economics Vol. 49; no. 1; pp. 36 - 74
Main Authors Ling, David C., Naranjo, Andy, Scheick, Benjamin
Format Journal Article
LanguageEnglish
Published Bloomington Blackwell Publishing Ltd 01.03.2021
Subjects
asset concentration
Asymmetry
home bias
information asymmetry
location
returns
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Summary:Using a unique setting with significant cross‐market information asymmetries and a large sample of individual commercial property holdings, we provide robust evidence showing that local information plays a significant role in the linkage between local asset concentrations and return outperformance. We further document a significant positive relation between local asset concentration and portfolio returns in markets where information asymmetry is most severe. Two novel identification strategies that exploit a local lender's ability to price the local investor's information advantage and exogenous variation in sales price disclosure laws across states confirm an information‐based effect that is distinct from risk‐based or behavioral explanations.
ISSN:1080-8620
1540-6229
DOI:10.1111/1540-6229.12336