This paper examines the contribution of out-of-town second-house buyers to mispricing in the housing market. We show that demand from out-of-town second-house buyers during the mid 2000s predicted not only house-price appreciation rates but also implied-to-actual-rent-ratio appreciation rates, a proxy for mispricing. We then apply a novel identification strategy to address the issue of reverse causality. We give supporting evidence that out-of-town second-house buyers behaved like misinformed speculators, earning lower capital gains (misinformed) and consuming smaller dividends (speculators). Received August 4, 2014; accepted August 28, 2015 by Editor Stefan Nagel.

Environmental regulation in the United States has undergone a slow evolution from command and control strategies towards market-based regulations. One such innovation is the Toxics Release Inventory (TRI), a regulation that requires polluting firms to publicly disclose information about their toxic emissions. The basic tenet of this regulation is that it corrects for informational asymmetries between polluters and households, allowing communities to pressure polluters to decrease their emissions. Policy-makers have judged the TRI a tremendous success, as national releases declined by 43% between 1988 and 1999. Yet many of the fundamental problems which are known to lead to the classic failure of the Coase theorem (such as high transaction costs and difficulties in organizing) cast doubt on the effectiveness of disclosure rules, alone, to lead to an efficient outcome in the case of pollution. We use an event study methodology with high-quality data on house prices and other local attributes to assess the extent to which the public values changes in toxic releases and thus the success of TRI. Our major findings include: (1) declines in toxic releases appear unrelated to any political economy variables that might lead to public activism; (2) initial information released under TRI had no significant effect on the distribution of house prices; and (3) house prices show no significant impact of declines in reported toxic releases over time. Standard errors are small enough that we can reject the hypothesis that large declines in toxic releases lead to more than a 0.5% increase in house prices. These results also hold when we control for differences in the availability of information on TRI and the possible effect of expectations. Our findings cast doubt on the ability of the public to process complex information on hazardous emissions and support the Coase theorem in that right-to-know laws such as TRI may not be the most effective form of environmental regulation.

Prior empirical evidence regarding the impact of dividend taxes on firm valuation is mixed. This study avoids some of the complications encountered in previous empirical work by exploiting institutional characteristics of REITs, such as their limited discretion over dividend policy and the relative transparency of REIT assets. We regress the market value of equity on the market value of assets and tax basis, which creates tax deductions that lower future dividend taxes without affecting future pretax cash flow. We find that firm value is positively related to tax basis, suggesting that future dividend taxes are capitalized into share prices.