Hedging Housing Risk*

An unusually rich source of data on housing prices in Stockholm is used to analyze the investment implications of housing choices. This empirical analysis derives market-wide price and return series for housing investment during a 13-year period, and it also provides estimates of the individual-specific, idiosyncratic, variation in housing returns. Because the idiosyncratic component follows an autocorrelated process, the analysis of portfolio choice is dependent upon the holding period. We analyze the composition of household investment portfolios containing housing, common stocks, stocks in real estate holding companies, bonds, and t-bills. For short holding periods, the efficient portfolio contains essentially no housing. For longer periods, low-risk portfolios contain 15 to 50 percent housing. These results suggest that there are large potential gains from policies or institutions that would permit households to hedge their lumpy investments in housing. We estimate the potential value of hedges in reducing risk to households, yet yielding the same investment returns. The value is surprisingly large, especially to poorer homeowners.     

Versicherungstechnische Gesichtspunkte auf die finanziellen Fragen der Lebensversicherung

Kapitel I. Bibliographisches

Die versicherungstechnische Litteratur hat sich verhältnismässig wenig mit den aktuariell-finanziellen Fragen befasst. Bemerkenswert ist es deshalb, dass die meisten von den bis jetzt abgehaltenen neun internationalen Aktuarkongressen die eine oder die andere Frage aus oben erwähntem Gebiet in ihrem Programm aufgenommen haben. So z. B. beschäftigte sich der erste Kongress, der 1895 in Brüssel tagte, mit dem Gegenstand: “Des mesures qui pourraient être prises par les institutions qui contractent des engagements à long terme, pour se premunir contre les conséquences des variations du taux d intérêt.” Der Kongress im Jahre 1900 in Paris hatte in seinem Programm das Thema: “Méthodes à employer pour evaluer les titres mobiliers compris dans l'actif d'une Société quelconque.” Bei dem New Yorker Kongress 1903 wurde die Prage über “The Probable Future Course of the Rate of Interest” erörtert. Dem Wiener Kongress 1909 war die Frage über “Kapitalsanlagen der Versicherungsgesellschaften mit besonderer Berücksichtigung der modernen Entwickelung” zur Behandlung vorgelegt. Das Programm des Londoner Kongresses 1927 enthielt das Thema “Currency Depreciation as affecting Life Assurance Contracts”.     

Transferring knowledge across sub-genres of the ABC implementation literature

In the last decade, a continuous stream of empirical articles has investigated how various implementation process factors (including, top management support, adequate resources, and ABC training) influence ABC implementation success. However, at the same time, a growing number of researchers have criticised this ‘mainstream approach’ for, among other things, neglecting issues of power and politics and for viewing ABC implementations as something inherently positive. Based on Lukka and Granlund's [Lukka, K., Granlund, M., 2002. The fragmented communication structure within the accounting academia: the case of activity-based costing research genres. Acc. Organ. Soc. 27, 165–190] call for communication between various streams of ABC research, the purpose of this paper is to discuss how the ‘mainstream’ implementation literature may benefit from insights made in the politically oriented literature. A key conclusion is that such an analysis not only provides us with enriched explanations of the relatively strong and coherent findings in the ‘mainstream’ ABC implementation literature, but has also the potential to explain ‘unexpected’ and ‘contradictory’ results found in this stream of research. Based on these observations, a number of directions for future research are proposed.     

Transaction costs, capital-gains taxes, and housing demand

The paper considers the effect of transaction costs—particularly in the form of capital-gains taxes—on the aggregate demand for owner-occupied housing. The framework is an overlapping-generations model, where consumers can avoid the transaction costs (taxes) by keeping the same house for both periods of life. The first part of the paper analyzes the consumer's choice problem. It distinguishes between costs that are fixed irrespective of the size of the house bought or sold, and costs such as capital-gains taxes that are related to the house value. It is shown that higher transaction costs have lock-in effects, inducing consumers to keep the same house for both periods. Also it is found that under a wide variety of circumstances the amount of housing demanded will increase as the household is being locked in. Finally, the paper looks at the effects on aggregate demand from an increase in capital-gains taxes. It is shown that an increased rate of taxation decreases demand for low tax rates. But for high tax rates, when lock-in effects become important, one generally gets the opposite effect; high tax rates tend to increase housing demand.     

Agency and structure in management accounting research: Reflections and extensions of Kilfoyle and Richardson

This paper is a reaction to and extension of Kilfoyle and Richardson's (K&R) paper “Agency and structure in budgeting: thesis, antithesis and synthesis” [Critical Perspectives on Accounting, 2011;2:183–199] with the aim of contributing to the ongoing discussion about how to conceptualize agency and structure in management accounting research. More specifically, while we fully sympathize with K&R's overall conclusion that a duality perspective (as opposed to dualism) has the best potential to address the intriguing paradox of embedded agency, we also argue that some of their writings open up for multiple interpretations, of which some may be problematic if we want to dissolve the separation of agency and structure. As a reaction to this, we propose a number of specifications resulting in a duality perspective which is grounded in a ‘flat and local’ ontology. This perspective, in turn, forms the basis for the development of a general framework which identifies four principal origins of embedded agency, of which K&R mainly discuss one. In relation to K&R, our paper thus extends their line of argument by suggesting a number of interesting, yet largely unexplored avenues for future management accounting research.     

The Swedish banking crisis: roots and consequences

The article analyses the Swedish banking crisis in the early1990s. Newly deregulated credit markets after 1985 stimulateda competitive process between financial institutions where expansionwas given priority. Combined with an expansive macro policy,this contributed to an asset price boom. The subsequent crisisresulted from a highly leveraged private sector being simultaneouslyhit by three major exogenous events: a shift in monetary policywith an increase in pre-tax interest rates, a tax reform thatincreased after tax interest rates, and the ERM crisis. Combinedwith some overinvestment in commercial property, high real interestrates contributed to breaking the boom in real estate pricesand triggering a downward price spiral resulting in bankruptciesand massive credit losses. The government rescued the bankingsystem by issuing a general guarantee of bank obligations. Thetotal direct cost to the taxpayer of the salvage has been estimatedat around 2 per cent of GDP.     

Adjustment in Property Space Markets: Taking Long-Term Leases and Transaction Costs Seriously

Markets for property space adjust only gradually because tenants and landlords are constrained by long-term leases and transaction and information costs. Not only do rents adjust slowly, but space occupancy, which depends on historical rents, often differs from demand at current rent. This creates "hidden vacancies," vacancies that will develop in the future if market rent and the space demand driver are unchanged. That is, if current rent is greater/lesser than average rent, then hidden vacancies are positive/negative. Moreover, because of hidden vacancies, open vacancies and rent are not mirror images of each other. Thus it is necessary to estimate both rental and vacancy rate adjustment processes. We do this using annual data for Stockholm offices during the 1977–2002 period and simulate the response of rent and vacancies (open and hidden) to an employment shock.     

The demand for housing in Sweden: Equilibrium choice of tenure and type of dwelling

Most studies of housing demand and tenure choice only identify two modes of tenure: owner-occupied one-family houses and rental apartments. Furthermore they are typically based on a cross section across all households. In this study we use recent Swedish data to overcome these weaknesses. We identify owner-occupied apartments (coop shares) as a third mode of tenure, and show that this should be treated separately. We also use information about the household's own assessment of its probability of moving during the next year. We demonstrate that it makes a large difference if likely movers are eliminated from the sample.     

Non-parametric estimation of operational risk losses adjusted for under-reporting

Not all claims are reported when a database for financial operational risk is created. The probability of reporting increases with the size of the operational risk loss, and converges towards one for big losses. Losses in operational risk have different causes, and usually follow a wide variety of distributional shapes. Therefore, a method for modelling operational risk based on one or two parametric models is deemed to fail. In this paper, we introduce a semi-parametric method for modelling operational risk that is capable of taking under-reporting into account and being guided by prior knowledge of the distributional shape.     

Implicit Forward Rents as Predictors of Future Rents

This paper investigates the relation between the term structure of rents and future spot rents. A rich database of office rental agreements for various maturities is used to estimate the term structure of rents, and from this structure implicit forward rents are extracted. The data pertain to commercial properties in the three largest Swedish cities for the period 1998–2002. A positive relation between forward and spot rents is found in some regions, but forward rents underestimate future rent levels. Another contribution of the paper lies in the area of rental index construction. We provide evidence that rental indices should not only be quality constant ( i.e. , control for characteristics), but should also be maturity constant.