What Moves Retail Property Returns at the Metropolitan Level?

In this article the determinants of metropolitan-level appraisal-based retail property returns are examined by estimating a six-equation model of retail construction starts, retail sales, stock-market returns, commercial mortgage rates, inflation, and the logarithm of stock-market volatility. Residuals from these equations are then used to explain actual movements in retail real estate returns. Our empirical procedure looks at both unadjusted and unsmoothed appraisal-based retail real estate returns. The general finding is that unsmoothed appraisal-based retail real estate returns lag significantly behind market conditions. Furthermore, the results suggest that very little of the variation in metropolitan-level appraisal-based retail real estate returns can be explained by macroeconomic news events.     

Liquidity,exchange listing,and common stock performance

The liquidity of securities—the relationship between volume of trading and changes in market price—has won increasing recognition as an element of investment strategy in recent years. Relatively high liquidity is deemed to be a desirable characteristic of a stock, especially for the institutional investor, who typically trades in large volume. Thus, firms can generally be expected to seek means of enhancing the liquidity of their shares. One of the supposed means of accomplishing this is by listing one's stock on a national securities exchange. This paper examines the relationship of common stock liquidity to both exchange listing and price behavior during major up and down movements in the market. Our conceptual and empirical analyses indicate that liquidity is linked to price behavior; and we suggest that the view held by at least some corporate officers—that exchange listing increases liquidity—may be erroneous. More specifically, it appears that when the amount of firm capitalization is taken into account, exchange listing does not result in greater stock liquidity.     

Will Competitive Bidding Decrease Medicare Prices?

Recent measures to reduce Medicare spending include the use of competitive bidding in determining reimbursement prices. Several competitive bidding experiments have been conducted by the Centers for Medicare and Medicaid Services (CMS) to determine reimbursement prices. This paper investigates the use of competitive bidding to set reimbursement prices for durable medical equipment, prosthetics, orthotics, and supplies. First, the competitive bidding process is examined on a theoretical level. It is shown that the CMS competitive bidding process (auction) is inefficient, leads to price increases, and may cause decreases in the quality of services. Next, data supporting the theoretical predictions are presented. Finally, we suggest that a descending variant of the Ausubel, Cramton, and Milgrom (2006) clock-proxy auction be used.     

Worse than enemies. The CEO's destructive confidant

The CEO is often the most isolated and protected employee in the organization. Few leaders, even veteran CEOs, can do the job without talking to someone about their experiences, which is why most develop a close relationship with a trusted colleague, a confidant to whom they can tell their thoughts and fears. In his work with leaders, the author has found that many CEO-confidant relationships function very well. The confidants keep their leaders' best interests at heart. They derive their gratification vicariously, through the help they provide rather than through any personal gain, and they are usually quite aware that a person in their position can potentially abuse access to the CEO's innermost secrets. Unfortunately, almost as many confidants will end up hurting, undermining, or otherwise exploiting CEOs when the executives are at their most vulnerable. These confidants rarely make the headlines, but behind the scenes they do enormous damage to the CEO and to the organization as a whole. What's more, the leader is often the last one to know when or how the confidant relationship became toxic. The author has identified three types of destructive confidants. The reflector mirrors the CEO, constantly reassuring him that he is the "fairest CEO of them all." The insulator buffers the CEO from the organization, preventing critical information from getting in or out. And the usurper cunningly ingratiates himself with the CEO in a desperate bid for power. This article explores how the CEO-confidant relationship plays out with each type of adviser and suggests ways CEOs can avoid these destructive relationships.     

Primary and secondary values of wetland ecosystems

Wetlands are continuously degraded in many parts of the world. One reason is the lack of the appropriate valuation of the multifunctionality of wetland. In an attempt to improve the understanding of the importance of this feature of wetlands an alternative classification of values is suggested; primary and secondary values. Primary value refers to the development and maintenance of ecosystems — their self-organizing capacity. Secondary values are defined as the outputs, life-support functions and services, generated by wetlands. Methods for measuring these values are discussed. Three case studies are presented which use different valuation methods and which to different degrees capture the primary and secondary values. It is concluded that only part of the total wetland value can be captured in monetary terms.     

Illiquidity and Pricing Biases in the Real Estate Market

This article addresses the micro-analytic foundations of illiquidity and price dynamics in the real estate market by integrating modern portfolio theory with models describing the real estate transaction process. Based on the notion that real estate is a heterogeneous good that is traded in decentralized markets and that transactions in these markets are often characterized by costly searches, we argue that the most important aspects defining real estate illiquidity in both residential and commercial markets are the time required for sale and the uncertainty of the marketing period. These aspects provide two sources of bias in the commonly adopted methods of real estate valuation, which are based solely on the prices of sold properties and implicitly assume immediate execution. We demonstrate that estimated returns must be biased upward and risks downward. These biases can be significant, especially when the marketing period is highly uncertain relative to the holding period. We also find that real estate risk is closely related to investors' time horizons, specifically that real estate risk decreases when the holding period increases. These results are consistent with the conventional wisdom that real estate is more favorable to long-term investors than to short-term investors. They also provide a theoretical foundation for the recent econometric literature, which finds evidence of smoothing of real estate returns. Our findings help explain the apparent risk-premium puzzle in real estate—that is, that ex post returns appear too high, given their apparent low volatility—and can lead to the formal derivation of adjustments that can define real estate's proper role in the mixed-asset portfolio.     

UTILITY FUNCTIONS AND DEMAND STRUCTURE*

The purpose of this paper is to review the demand structures implied by several common utility specifications. After a review of the Hicks-Allen measures of the demand structure, four utility functions are examined including the Cobb-Douglas, CES, and Mukerji functions. The results indicate that the most popular utility specifications provide patterns of demand parameters which do not conform to those made in estimation of commodity demand functions L'objet de cet papier est passer en revue des structures commandes de quelques caractéristique de ?utilité. Après un revoir de la proposition du Hicks et Allen du structure commandes, quatre fonctions pour ?utililé sonl examiné. Ils renfermes les fonclions du Cobb-Douglas, CES, et Mukerji. Les résultats indiquent ce que les caractérisliques de, ?utilité le plus populaire pouvoissem les modèles les quels ne confor-mentpas à celles des fonctions des commandes pour les produils.