INFORMATION DIFFUSION AND ASSET PRICING: EVIDENCE FROM THE SINGAPORE PROPERTY MARKET

Abstract

Previous studies of the gradual information diffusion model have focused mainly on studying the predictability of an asset’s price using an asset’s own past performance. In this paper, I was able to provide evidence supporting cross-predictability across different assets. Using data from the Singapore condominium market, I find that the presale market plays a leading role for the spot market. Many studies have also put forth the argument that momentum traders act to destabilize markets by causing a price overshooting followed by a subsequent reversal. However, I was unable to find any evidence supporting the hypothesis that momentum investors also have destabilizing effects across assets. Instead I find that the large developers are a potential source of instability across assets in the Singapore condominium market.