Empirical tests of real estate market efficiency

✍ Scribed by Karl L. Guntermann; Stefan C. Norrbin

• Publisher: Springer US
• Year: 1991
• Tongue: English
• Weight: 915 KB
• Volume: 4
• Category: Article
• ISSN: 0895-5638
• DOI: 10.1007/bf00161931

✦ Synopsis

Recent empirical research using real estate data has supported the weak and semi-strong forms of the efficient markets hypothesis. Previous studies have not included an estimate of expected appreciation into the tests of market efficiency, thus raising a question about the reliability of the results. We first use a market model to test for market efficiency with results similar to those reported by others. We next use a dynamic multiple indicator, multiple cause (DYMIMIC) model, which extracts a vector of expected appreciation from the price data, to test market efficiency. This approach produces superior results and a stronger conclusion about the efficiency of housing markets. The results indicate limited adjustment delays which can be explained by the existence of high transactions and search costs.