The Changing Asymmetric Information Component of REIT Spreads: A Study of Anticipated Announcements
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This study examines the risk-compensating behavior of REIT market makers. The bid-ask spread is hypothesized to compensate market makers for three costs: asymmetric information, order processing, and inventory. As the market maker's perceived likelihood of transacting with a better-informed individual increases (decreases), the percentage of the spread that is attributed to asymmetric information will increase (decrease). This study examines the asymmetric information component of the bid-ask spread immediately prior to and following REIT dividend announcements and REIT funds from operations announcements during 1995 and 1996. The asymmetric information component increases the day before and then declines subsequent to dividend announcements of small and equity REITs. Asymmetric information costs increase following funds from operations announcements.
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- The Changing Asymmetric Information Component of REIT Spreads: A Study of Anticipated Announcements
The Journal of Real Estate Finance and Economics
Volume 20, Issue 2 , pp 195-210
- Cover Date
- Print ISSN
- Online ISSN
- Kluwer Academic Publishers
- Additional Links
- funds from operations
- cash flow
- market microstructure
- asymmetric information
- Industry Sectors
- Author Affiliations
- 1. Department of Finance, College of Business, University of Missouri–Columbia, 214 Middlebush Hall, Columbia, MO, 65211
- 2. Kelley School of Business, Indiana University, Bloomington, IN, 47405
- 3. Department of Finance, E.J. Ourso College of Business Administration, Louisiana State University, Baton Rouge, LA, 70803-6308