International Transmission Mechanisms and Contagion in Housing Markets

This paper explores international transmission mechanism and its role in contagion effect in the housing markets across six major Asian cities. The analysis is based on the identification of house price diffusion effects through a global vector autoregressive (GVAR) model estimated using quarterly data for six major Asian cities (Hong Kong, Tokyo, Seoul, Singapore, Taipei and Bangkok) from 1991Q1 to 2011Q2. The empirical results indicate that the open economies heavily relying on international trade such as Singapore, Japan (Tokyo), Taiwan (Taipei) and Thailand (Bangkok) show positive correlations between the economy's openness and house prices, which is consistent with the Balassa–Samuelson hypothesis. Interestingly, some region‐specific conditions also appear to play important roles as determinants of house price movements, which may be driven by restrictive housing policies and demand–supply imbalances such as Singapore and Bangkok. These results are reasonably robust across several model specifications. The findings bear significant implications for formulation of investment strategy and public policies.     

A Keynesian explanation of Indian government bond yields

Abstract

John Maynard Keynes held that the central bank’s actions mainly determine long-term interest rates through short-term interest rates and various monetary policy measures. His conjectures about the determinants of long-term interest rates were made in the context of advanced capitalist economies and were based on his views on liquidity preference, ontological uncertainty, and the formation of investors’ expectations. Is Keynes’s conjecture that the central bank’s action is the main driver of long-term interest rates valid in emerging markets, such as India? This paper empirically investigates the determinants of changes in Indian government bonds’ nominal yields. Changes in short-term interest rates, after controlling for other crucial variables, such as changes in the rate of inflation and the rate of economic activity, take a lead role in driving the changes of the nominal yields of Indian government bonds. This suggests that Keynes’s views on long-term interest rates can also be applicable to emerging markets. The empirical findings reveal that higher fiscal deficits do not appear to exert upward pressures on government bond yields in India.     

Does Real Estate Defy Gravity? An Analysis of Foreign Real Estate Investment Flows

This paper investigates the scale and determinants of foreign investment flows between national real estate markets. Using data for over 100 countries over 2007–2012, the results indicate that, consistent with previous studies for trade, foreign direct and portfolio investment variables such as size and distance have significant effects on foreign real estate investment flows. Large positive size effects are consistent with a combination of scale economies and information externalities producing investment concentration across markets and in conjunction with direct and indirect transaction costs specific to real estate markets. Physical distance coefficients are relatively small compared to the studies of FDI.     

An Empirical Comparison of Two Stochastic Volatility Models using Indian Market Data

We conduct an empirical comparison of hedging strategies for two different stochastic volatility models proposed in the literature. One is an asymptotic expansion approach and the other is the risk-minimizing approach applied to a Markov-switched geometric Brownian motion. We also compare these with the Black–Scholes delta hedging strategies using historical and implied volatilities. The derivatives we consider are European call options on the NIFTY index of the Indian National Stock Exchange. We compare a few cases with profit and loss data from a trading desk. We find that for the cases that we analyzed, by far the better results are obtained for the Markov-switched geometric Brownian motion.     

Consumer ethnocentrism offline and online: The mediating role of marketing efforts and personality traits in the United States, South Korea, and India

Consumer ethnocentrism is an important concept that is used to understand international marketing phenomena. In this article, the authors conduct two empirical studies. Using consumer data from the United States, South Korea, and India (three diverse cultural and economic environments), they explore six hypotheses. In Stage 1, the results suggest that across all three countries, consumer ethnocentrism provokes negative attitudes toward both foreign advertisements and foreign products. The authors identify a set of consumer variables (i.e., consumers’ global mind-set) that may mediate consumers’ unfavorable attitudes toward foreign advertisements and products derived by consumer ethnocentrism. In Stage 2, the authors find that consumer ethnocentrism dampens consumers’ online consumption activities on a foreign Web site. Finally, the authors find that marketers’ e-mail communications to foreign consumers mediate consumer ethnocentrism in online environments. Hyokjin Kwak (hkwak@drexel.edu) is an assistant professor of marketing at Drexel University. His research interests include advertising effects, consumer communications, and strategic marketing. He has publications in theJournal of Consumer Psychology, theJournal of Advertising Research, theJournal of Current Issues and Research in Advertising, theJournal of Consumer Marketing, and other marketing journals. Anupam Jaju (ajaju@gmu.edu) is an assistant professor of marketing in the School of Management at George Mason University. His main research interests are in marketing strategy, marketing-technology interface, and international marketing. His work has been published in theJournal of International Management, Marketing Theory, andMarketing Education Review. Trina Larsen Andras (published as Trina Larsen, larsent@ drexel.edu) is a professor and the head of the Marketing Department at Drexel University. Her research has been published in many of the major professional journals in her field, includingHarvard Business Review, theColumbia Journal of World Business, International Marketing Review, Industrial Marketing Management, Management International Review, theJournal of Global Marketing, and theJournal of International Marketing, among others. Her research is focused on international marketing, specifically, cross-cultural behavioral and relationship issues in international marketing management.     

Reflected Glory Versus Repulsive Envy: How Do the Smiths Feel About the House of the Joneses?*

A key question raised regarding conspicuous consumption is whether such consumption leads to positive or negative net externalities. The present paper examines how the presence of luxury and expensive properties within a local area affects the house prices in Taipei City. Positive externalities may be associated with improved urban amenities or reflected glory. Negative externalities may be associated with the adverse reference group effect; that is, repulsive envy. The paper discusses the spillover effects due to changes in neighborhood's housing characteristics, and shows significant spatial patterns in house prices and the importance of socioeconomic influences on house prices.     

Which school attributes matter? The influence of school district performance and demographic composition on property values

Increasing levels of segregation in American schools raises the question: do home buyers pay for test scores or demographic composition? This paper uses Connecticut panel data spanning eleven years from 1994 to 2004 to ascertain the relationship between property values and school district attributes, such as student test scores and the racial and ethnic composition of the student body. Town and census tract fixed effects are included to control for neighborhood unobservables. The effect of changes in school district attributes is also examined over a decade long time frame in order to focus on the effect of long-run changes, which are more likely to be capitalized into prices. The study finds strong evidence that increases in percent Hispanic have a negative effect on housing prices in Connecticut, but mixed evidence concerning the impact of test scores on property values. Student test scores also appear to have increased in importance for explaining housing prices in recent years, while the importance of percent Hispanic has declined. Finally, the study finds that estimates of property tax capitalization increase substantially when the analysis focuses on long run changes.     

The Impact of Property Condition Disclosure Laws on Housing Prices: Evidence from an Event Study Using Propensity Scores

We examine the impact of seller??s Property Condition Disclosure Laws on residential real estate values. A disclosure law may address the information asymmetry in housing transactions shifting risk from buyers and brokers to the sellers and raising housing prices as a result. We combine propensity score techniques from the treatment effects literature with a traditional event study approach. We assemble a unique set of economic and institutional attributes for a quarterly panel of 291 US Metropolitan Statistical Areas (MSAs) across 50 US States spanning 21?years from 1984 to 2004. The study finds that the average sales price of houses in a metropolitan area increases by an additional 3 to 4% over a 4?year period if the state adopts a Property Condition Disclosure Law, which is consistent with approximately a 19 basis point or 6.4% reduction in the risk premium associated with purchasing owner-occupied housing. When we compare the results from parametric and semi-parametric (propensity score) event analyses, we find that the semi-parametric analysis generates moderately larger estimated effects of the law on housing prices.     

Corporate performance and firm perception: The British experience

Previous academic research has presented a theoretical basis for a relationship between attributes of a firm's reputation and its financial performance. For the United States, researchers have analysed the correspondence between market and accounting based measures of US firm performance and external evaluators' perceptions of the qualitative attributes of US firms. In this study, expert surveys on the qualitative performance of British firms conducted by the British publication, the Economist, which are similar in content to surveys conducted by Fortune magazine for US firms, are used to determine the correspondence between qualitative and quantitative measures of British firms' performance. Results indicate that differences may exist between US and Britain in the use of qualitative survey data on a firm's strategic attributes as a forecast of a firm's future quantitative performance measures. Results also indicate that for small firms, certain qualitative factors (e.g. capacity to innovate) may be of greater importance in forecasting accounting and security market returns.