Public Information and Abnormal Returns in Real Estate Investment

This study performs empirical tests of the semistrong form efficiency of a real estate investment market. An asset pricing model is utilized to estimate the abnormal returns resulting from two types of public information, major changes in government tax shelter and rent control policies as well as unanticipated changes in interest rates. In both cases the results find an absence of significant abnormal returns and no evidence to suggest that real estate investors can utilize information concerning government policy changes or interest rate movements to earn higher returns on a risk-adjusted basis. In general the findings of this study conform to the semistrong form version of the efficient markets hypothesis.