Heterogeneous effects of information disclosure: Evidence from housing markets

I empirically show that information asymmetry among market participants leads to heterogeneous effects of information disclosure, by exploiting a magazine's reports on good places to live. The positive news has little effect on local homebuyers, indicating that the news may not offer new information about local fundamentals. Instead, the number of transactions made by those buyers gradually increases by 13.2% during the two-year pre-treatment period. However, informationally disadvantaged out-of-town buyers react strongly to the news. The number of such buyers increases by 21.9% in the quarter following the magazine reports, and local housing prices increase significantly by as much as 9.0% in two years. Non-local buyers are therefore largely responsible for the house price appreciation in the focal markets. The results do not only suggest that third-party information interventions have the potential to mitigate information asymmetries, but also highlight the importance of being promptly informed in housing markets.