Pricing Structure in Tokyo Metropolitan Land Markets and its Structural Changes: Pre-bubble,Bubble, and Post-bubble Periods

In this paper, we estimate hedonic price equations of Japanese commercial and residential land prices for a 25-year period and to investigate possible structural changes in these price equations. Our price equations are based on transaction prices, not appraised land values, of commercial land in Central Business Districts of Tokyo (Chiyoda Ward, Chuo Ward, and Minato Ward), and residential land of its suburb (Setagaya Ward). We find that price structure differs substantially among locations, reflecting differences in supplier pricing and end-user preferences. We also find significant structural changes in price structure, identifying pre-bubble, bubble and post-bubble periods.

House Prices and Bubbles in New Zealand

This paper studies actual (real) house prices relative to fundamental (real) house values in New Zealand for the period 1970–2005. Utilizing a dynamic present value model, we find disparities between actual and fundamental house prices in the early 1970s and 1980s and from 2000 to date. We model the bubble component that is related to fundamentals (the intrinsic component), making it possible to highlight whether a bubble still exists after that component is accounted for. We then analyze any remaining bubble to detect any momentum behavior. Much of the overvaluation of the housing market is found to be due to price dynamics rather than an overreaction to fundamentals.

The ex-dividend day stock price anomaly: evidence from the Greek stock market

This paper examines the ex-dividend stock price and trading volume behavior in the Greek stock market for the period 2000–2004. We use both standard event-study methodology and cross-sectional regression analysis in assessing the ex-dividend stock price anomaly. We find that stock prices drop less than the dividend amount. By examining abnormal returns as well as abnormal trading volume around the ex-dividend day, we find strong evidence of short-term trading, which is consistent with the presence of dividend-capturing activities around the ex-dividend day. The results from the cross-sectional regression analysis confirm that the short-term trading hypothesis explains the ex-dividend day stock price anomaly in Greece.

Do Repeated Wildfires Change Homebuyers’ Demand for Homes in High-Risk Areas? A Hedonic Analysis of the Short and Long-Term Effects of Repeated Wildfires on House Prices in Southern California

Unlike most hedonic studies that analyze the effects of a one-time event, this paper analyzes the effects of forest fires that are several years apart in a small geographical area. We find that repeated forest fires cause house prices to decrease for houses located near the fires. We test and reject the hypothesis that the house price reduction from one fire is equal to the house price reduction from a second fire. The first fire reduces house prices by about 10%, while the second fire reduces house prices by nearly 23%, a statistically significant difference. The pattern of these results are robust to several alternative econometric specifications.

Regional Housing Prices in the USA: An Empirical Investigation of Nonlinearity

Existing literature on housing prices is predominantly in a linear framework, and an important question that has not been addressed is whether housing prices exhibit nonlinearity. We examine Smooth Transition Autoregressive (STAR) model based nonlinear properties of housing prices over the 1969–2004 period for the entire US and the four regions. Our main findings are (1) housing price for the entire US and all regions except for the Midwest show non-linearity, (2) the dynamic properties implied by the nonlinear estimation explain the typical patterns that have characterized each housing market, and (3) results of Granger causality tests look more plausible in the nonlinear framework where we find stronger evidence of Granger causality from housing price to employment and also from mortgage rates to housing price.

Does Bancassurance Reduce the Price of Financial Service Products?

I assess the impact of bancassurance on the price of retail financial services. I find that service fees in a product bundle increase less than proportionally to the number of services; that an increase in the number of clients in each product bundle market reduces fees by 1.5%; that the degree of competition in the markets of each bundle also reduces fees; that premium products have higher average costs; and finally, that cross-holdings reduce prices by about 5% and bancassurance reduces prices by just over 6%. The price reduction declines if both strategies are combined.

Trading House Price Risk with Existing Futures Contracts

This paper examines the use of futures contracts to hedge residential real estate price risk. We examine whether existing futures contacts can effectively be used to offset volatility in national house prices. Little evidence of any simple systematic relation between national prices and futures prices is found. Since house prices are not easily replicated with a portfolio of existing futures contracts, a further implication is that the Chicago Mercantile’s introduction of a financial asset whose value reflects house prices will help complete the market. Nevertheless, the success of the CME’s new derivative contracts may be limited in light of state and regional house price correlations.

Oil convenience yields estimated under demand/supply shock

This paper extends the call option model of Milonas and Thomadakis (1997) to estimate oil convenience yields with futures prices. We define the business cycle of a seasonal commodity with demand/supply shocks and find that the convenience yield for crude oil exhibits seasonal behavior. The convenience yield for West Texas Intermediate (WTI) crude oil is the highest in the summer, while that for Brent crude oil is the highest in the winter. This implies that WTI crude oil is more sensitive to high summer demand and that Brent crude oil is more sensitive to shortages in winter supply. Convenience yields are negatively related to the inventory level of the underlying crude oil and positively related to interest rates due to the business cycle. We also show that convenience yields may explain price spread between WTI crude oil and Brent crude oil. Our computed convenience yields are consistent with Fama and French (1988) in that oil prices are more volatile than futures prices at low inventory level, verifying the Samuelson (1965) hypothesis that future prices are less variables than spot prices at lower inventory levels.

Principal–Agent Conflict and Broker Effort Near Listing Contract Expiration: The Case of Residential Properties

In the real estate market the seller/agent relationship changes over the course of the listing contract. As the contract expiration nears, brokers may increase efforts generating more potential buyers and, perhaps, a higher offered price. Brokers may also persuade the seller to reduce the reservation price. These two aspects have different implications for the selling price of the property. Employing a sample of 24,100 properties sold in Clark County, Nevada, we investigate the relationship between the selling price and the time-to-expiration of the listing contract. We find that prices are lower if the property is sold near the expiration of the listing contract, indicating that the price-reduction effect dominates the broker-effort effect.

The Structure of Chinese Urban Land Prices: Estimates from Benchmark Land Price Data

Taking the recent benchmark land prices published by the Chinese city governments, the paper estimates commercial and residential land price curves of Chinese cities using cross-sectional data, controlling for urban population size and income level. The urban land leasing price–distance relationship is estimated based on the argument that monocentric urban structure is representative for Chinese cities. Both population size and income level are found to positively affect urban land price and price–distance gradients. Commercial land prices are higher than residential land prices except in suburbs or outer central urban areas, where the land prices of different uses converge. In most situations, commercial use price gradients are larger than those of residential use.

Directional Land Value Gradients

The standard urban model supports the concept of a constant land price gradient throughout the urban area. It is a reasonable conjecture that the land price gradient would vary with direction from the CBD. The variation in the gradient could be caused by a number of factors, but the idea that the land price gradient is flatter along radial transportation routes than in other directions is widely recognized even though there is little rigorous empirical work supporting this belief. This paper will examine the structure of urban land prices with a focus on the land price gradient as a function of the direction around the center of the city using a piecewise linear function. The added flexibility in the gradient estimate gained by this approach reveals a dramatically varying directional land price gradient.

How do commodity futures respond to macroeconomic news?

This paper investigates the impact of seventeen US macroeconomic announcements on two broad and representative commodity futures indices. Based on a large sample from 1989 to 2005, we show that the daily price response of the CRB and GSCI commodity futures indices to macroeconomic news is state-dependent. During recessions, news about higher (lower) inflation and real activity lead to positive (negative) adjustments of commodity futures prices. In contrast, we find no significant reactions during economic expansions. We attribute this asymmetric response to the state-dependent interpretation of macroeconomic news. Our findings are robust to several alternative business cycle definitions.

Who You Going to Call? Performance of Realtors and Non-realtors in a MLS Setting

This study attempts to shed some light on the extent of non-realtor broker listings on the MLS and their resulting price and time-on-the markets effects. Using duration, probit and selling price models, this study empirically examines whether the REALTOR designation provides a signal of quality that is reflected in the price and time on the market for sellers. Results indicate that properties listed by non-realtors on the MLS setting sell at lower prices, take slightly longer to sell, and are less likely to sell than properties listed by REALTORs in a MLS setting. Working with a REALTOR in a MLS setting appears to be advantageous to the seller.

The Interaction between Mortgage Financing and Housing Prices in Greece

Although the close empirical relationship between the evolution of mortgage lending and housing prices is well established in the literature, the direction of causation is less clear from a theoretical standpoint. We apply multivariate cointegration techniques in order to address this issue empirically for the Greek economy. Our results, based on a cointegration relationship that we identify as a mortgage loan demand equation, indicate that housing prices do not adjust to disequilibria in the market for housing loans. This suggests that in the long run the causation does not run from mortgage lending to housing prices. In the short run we find evidence of a contemporaneous bi-directional dependence.

Securities Transaction Tax and Market Efficiency: Evidence from the Japanese Experience

This study examines the effect of transaction costs on the time series behavior of stock returns over a period surrounding the April 1989 changes in tax rates on securities transactions and capital gains in Japan. We find significant decreases in estimates of the first-order autocorrelation in returns for Japanese stocks listed in Japan, but no changes for Japanese stocks dually listed in the United States as American Depository Receipts (ADRs), which were not subject to the tax law change. We also find lower price basis between the ADRs and their underlying Japanese stocks. These results are consistent with the hypothesis that a reduction in transaction costs improves the efficiency of the price discovery process.

Domino Effects Within a Housing Market: The Transmission of House Price Changes Across Quality Tiers

We argue that shocks to a housing market are transmitted through the hierarchy of quality tiers within a housing market. The result is the prediction of waves of house price changes accompanied by changes in transaction volume. Our study is related to existing models of spatial ripple effects across housing markets. The data are from the Hong Kong housing market. The findings from Granger causality tests strongly support the argument that domino effects within a single housing market occur in response to external shocks.

Individual Agents,Firms, and the Real Estate Brokerage Process

This study examines how individual agents affect house selling prices and time on the market while controlling for brokerage firm-specific effects as well as supply and demand conditions that vary by neighborhood. Firm size effects disappear once firm specialization and agent characteristics are taken into account but geographic concentration by firms leads to higher selling prices. For individual agents, neither sex nor selling own listings affects price or selling time, but there are gains from partnering transactions across firms. Agents who specialize in listing properties obtain higher prices for their sellers while those who specialize in selling obtain lower prices for their buyers. Houses nearer to other transactions of an agent sell for higher prices. Finally, greater scale of listing and selling activity by an agent tends to lower selling price or lengthen the time on the market.

An evaluation of conditional multi-factor models in active asset allocation strategies: an empirical study for the German stock market

This paper examines the out-of-sample performance of asset allocation strategies that use conditional multi-factor models to forecast expected returns and estimate the future variance and covariance. We find that strategies based on conditional multi-factor models outperform strategies based on unconditional multi-factor models, and do better than a passive buy-and-hold strategy. However, a strategy that uses the sample mean as a return forecast is superior. We also find that the estimation of the covariance matrices based on the conditional and unconditional multi-factor models does not improve the performance of the active asset allocation strategy relative to the incorporation of the historical covariance matrices. These results are fairly robust to different estimation approaches, as well as to the impact of transaction costs and the consideration of upper and lower bounds for the portfolio weights.

Residual income,value-relevant information and equity valuation: a simultaneous equations approach

The paper uses Ohlson (Contemp Account Res 11:661–687, 1995) and compares the relative predictability of the proposed simultaneous model for contemporaneous stock price with a traditional single equation model used by the previous studies. The paper also explores how residual income and value-relevant information affect firms’ equity price. The main results of the paper suggest that the predictive ability and estimation efficiency of the simultaneous models in explaining contemporaneous stock prices are better than those of the traditional single models. Moreover, investors will use the value-relevant information beyond accounting earnings, namely analysts’ earnings forecasts, bankruptcy cost and agency cost, in equity valuation to make decision. Note particularly, the higher the bankruptcy or agency cost is, the more important the role it plays in equity valuation and, on average, the higher the accuracy of price prediction is.

School Quality, House Prices and Liquidity

This paper develops an empirical framework for taking into account the effects of endogenous liquidity on price capitalization estimates. Changes in school attendance zones in the East Baton Rouge Parish public school district provide a natural experiment for studying how changes in school characteristics affect house prices and liquidity. House price and selling time, or liquidity, are simultaneously determined in search markets. The empirical model exploits variation in the surrounding neighborhood market conditions pertinent to each house to identify the system of price and liquidity equations. The estimates are consistent with search-market theory in that liquidity absorbs part of the capitalization of school quality.