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.     

Has the “CEO effect” increased in recent decades? A new explanation for the great rise in America's attention to corporate leaders

We introduce a new explanation for one of the most pronounced phenomena on the American business landscape in recent decades: a dramatic increase in attributions of CEO significance. Specifically, we test the possibility that America's CEOs became seen as increasingly significant because they were, in fact, increasingly significant. Employing variance partitioning methodologies on data spanning 60 years and more than 18,000 firm‐years, we find that the proportion of variance in performance explained by individual CEOs, or “the CEO effect,” increased substantially over the decades of study. We discuss the theoretical and practical implications of this finding. Copyright © 2014 John Wiley & Sons, Ltd.     

Reaffirming the CEO effect is significant and much larger than chance: A comment on Fitza (2014)

A recent study by Fitza argued that the prior estimates of the Chief Executive Officer (CEO) effect are conflated with events outside the CEO's control, are largely the result of random chance, and that the true CEO effect is smaller than has been previously estimated. We suggest that the empirical methodology employed by Fitza to support these claims substantially overstates the “random chance” element of the CEO effect. We replicate Fitza's findings, highlight methodological issues, offer alternative conclusions, and using multilevel modeling (MLM), suggest that his analyses mischaracterize the CEO effect. Copyright © 2016 John Wiley & Sons, Ltd.     

The Effectiveness of a Buzz Marketing Approach Compared to Traditional Advertising: An Exploration

Marketers are now willing to go anyplace they can find a captive audience to espouse the virtues of their products. The success of the “buzz” marketing approach is linked to the consumer being lured into doing the advertising by spreading the message to others. This study compares students’ responses to a traditional advertising and a buzz approach. Using a factor analysis to identify variables, the results show that subjects perceive a buzz approach to be more influential than a traditional advertising. However, they do not perceive a buzz approach to be authentic. This finding is consistent with practitioners’ argument that, although a buzz approach may be effective in the short-term, once consumers recognize its selling intent, the program may have a “boomerang effect.”     

Loan Loss Severity and Optimal Mortgage Default

This paper tests the contingent claims model of mortgage default in its ruthless or frictionless form. The principal tests of the model are based on an unconventional source of data, namely, loan loss severities on defaulted mortgages. The frictionless model has well-defined predictions about loss severities which we test in detail. The data analyzed include a random sample of all mortgages originated during the period 1975–90 and purchased by Freddie Mac, as well as the loss severities on all mortgages purchased by Freddie Mac which defaulted during the period. The frictionless model does not do well in these tests.     

Index Revision,House Price Risk,and the Market for House Price Derivatives

It is widely recognized that options and futures markets for housing can reduce and manage the risks inherent in consumers’ large investments in housing equity. The integrity of such markets depends, however, upon the use of transparent and replicable benchmarks for house prices and settlement values. In the USA, a series of state and metropolitan indexes have been produced by a government agency (the US Office of Housing Enterprise Oversight, OFHEO), and they have been widely disseminated for over a decade. By construction, the entire historical path of each of these indexes is, in principle, subject to revision quarterly, that is, every time the index is recalculated and data are published. This paper provides the first analysis of the magnitude and bias of these revisions, and it analyzes their systematic effects on the settlement prices in housing options markets. The paper considers the implications of these magnitudes for the development of risk-reducing futures markets.

Estimating unobservable valuation parameters for illiquid assets

A problem that often arises in applied finance is one where decision‐makers need to choose a value for some parameter that will affect the cash flows between two parties involved in the operation of an illiquid asset. Because the values of the cash flows also depend on various unobservable parameters, identifying the value of the policy parameter that achieves the desired allocation between the parties is no simple task, often resulting in disputes and the invocation of ad hoc approaches. We show how this problem can be solved using an extension of the well‐known ‘implied volatility’ technique from option pricing, and apply it to the determination of equilibrium rental rates on ground leases of commercial land.     

An investigation of the giving behavior of loyal,lapsed, and non‐givers to a religious organization

• This paper provides a comparative study of the giving behavior of current donors (CDs), lapsed donors (LDs), and non‐donors (NDs) in a Catholic diocese in New England. Focus groups were conducted and surveys were administered to Catholics to compare the attitudes and behaviors of lapsed and active donors as well as those who had not given to a recent diocesan annual campaign. The results show significant differences between the groups. Active donors indicate a much greater level of satisfaction with the church, are more aware of its programs, and feel they are more recognized for their gifts than do lapsed or NDs. These findings suggest that relationship fundraising, and creating trust, are critical to forging and maintaining valued donor relationships. The program implemented by the diocese as a result of the study is described.
• Marketing for religious organizations
• Lapsed donors
• Nonprofit marketing
• Marketing for churches

Copyright © 2009 John Wiley & Sons, Ltd.     

MARKET INDUCED AND GOVERNMENT MANDATED ENERGY CONSERVATION IN THE HOUSING MARKET: Econometric Evidence from the U.S.

This paper integrates and compares me results of two large-scale econometric analyses of the effects of residential energy prices upon the U.S. housing market. A simple model of energy consumption in the housing market is developed, and the results of these studies are compared with the common model. The two studies, using very different bodies of data and very different econometric techniques, yield very similar implications in terms of household expenditures and patterns of consumption. In particular, both studies confirm the importance of "natural conservation" in the housing market. Higher energy prices lead to substantially lower consumption of residential energy, even in the absence of regulation. In particular, it is estimated that a doubling of energy prices leads to a reduction of residential energy consumption of about twenty-five percent.