Commercial Mortgage-Backed Securities (CMBS) and Market Efficiency with Respect to Costly Information

58 Pages Posted: 4 Aug 2008

See all articles by Andreas D. Christopoulos

Andreas D. Christopoulos

affiliation not provided to SSRN

Robert A. Jarrow

Cornell University - Samuel Curtis Johnson Graduate School of Management

Yildiray Yildirim

Zicklin School of Business, Baruch College - The City University of New York

Abstract

Commercial mortgage-backed securities (CMBS) are complex asset-backed securities trading in markets that do not currently use derivatives pricing technology. This lack of usage is due to the complexity of the modeling exercise, and only the recent and costly availability of historical data. As such, CMBS markets provide a natural environment for the testing of market efficiency with respect to this costly information. Using this information, this article develops a CMBS pricing model to provide a joint test of the model and market efficiency. Backtesting our pricing model for 4 years, although there is some evidence of abnormal trading profits, we cannot reject the efficiency of the CMBS markets.

Suggested Citation

Christopoulos, Andreas D. and Jarrow, Robert A. and Yildirim, Yildiray, Commercial Mortgage-Backed Securities (CMBS) and Market Efficiency with Respect to Costly Information. Real Estate Economics, Vol. 36, Issue 3, pp. 441-498, Fall 2008, Available at SSRN: https://ssrn.com/abstract=1189949 or http://dx.doi.org/10.1111/j.1540-6229.2008.00219.x

Andreas D. Christopoulos (Contact Author)

affiliation not provided to SSRN

Robert A. Jarrow

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Department of Finance
Ithaca, NY 14853
United States
607-255-4729 (Phone)
607-254-4590 (Fax)

Yildiray Yildirim

Zicklin School of Business, Baruch College - The City University of New York ( email )

55 Lexington Ave., Box B13-260
New York, NY 10010
United States

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