Franchising and real estate brokerage

This paper examines the value of franchise affiliation to real estate brokerage firms. It uses a national sample to estimate models of brokerage firm sales and revenues. The results suggest that franchisees sell more properties than nonaffiliates, but that the average franchise sale results in less revenue. The net benefit of franchise affiliation is a 9.0 percent increase in net revenue to the average firm. We compare the initial cost of affiliation with the benefits and find that the up-front fees charged by franchisors are substantially lower than the present value of the stream of incremental profits generated by franchise affiliation.     

Fixed-percentage commissions and moral hazard in residential real estate brokerage

If home sellers cannot monitor real estate brokers' efforts on their behalf, fixed-percentage brokerage commissions can promote welfare by giving brokers an incentive to tailor their services to their clients' demands. This article shows how a competitive broker optimally allocates selling effort across clients who pay different commissions. There is an equilibrium in which clients who value brokerage services more highly offer to pay larger commissions and consequently receive more selling effort from the broker. If clients who are selling higher-priced houses tend to value brokerage services more highly, then this result helps explain the prevalence of fixed-percentage commissions in the residential real estate brokerage industry and suggests that they could emerge in a competitive setting.     

Residential real estate brokerage as a principal-agent problem

We analyze the terms of the brokerage contract between a house seller and his agent, using the established literature on the principal-agent problem. Considering the influence of moral hazard and adverse selection, we predict a number of features of the contract. Many of these features are not present in observed contracts. To account for this discrepancy, we discuss certain aspects of the real estate market which are not included in the standard principal-agent model but may explain the difference. Standard principal-agent theory neglects important contract design considerations, namely robustness and costs of complexity. In general, the commission contract performs poorly by failing to allocate risk efficiently or to provide agent incentives. It favors established agents and precludes contractual diversity. Finally, we contrast the brokerage contract for real estate with the dealership contract for used cars, but find no compelling answer as to why there are few used house dealers.     

Equilibrium and options on real assets

In aggregate, options on real and financial assets can havevery different properties. Typically, the good or service producedby a real asset has a finite elasticity of demand, and developershave finite capacities. Also, the supply of options can be limited,and developers can be less than perfectly competitive. In asubgame, perfect Nash equilibrium with these properties, theoptimal exercise policy, and resulting values of developed andundeveloped assets are calculated explicitly. The novel comparativestatics are discussed in detail.     

Valuation of human assets in a securities brokerage firm: An empirical study

When a service firm is acquired by another firm there is often a significant premium paid over the acquired firm's book value. Often a substantial portion of this premium is due to the value of the human assets acquired. This paper presents a methodology by which the value of the human assets may be determined separate and distinct from goodwill. This is then applied to a case study in a securities brokerage firm. Finally, an amortization schedule is set forth so the asset can be amortized for tax purposes.     

Indeterminacy of competitive equilibrium in incomplete market structures with financial assets as an extreme form of market coordination breakdown

Market coordination breakdowns can be formulated in terms of Incomplete Market Structures, whatever is the assumption made about market power (monopoly or competition). When the assumption of competition is made, and financial assets generate an incomplete market structure, there are, generically, an infinite number of equilibria. It is shown that after embedding the model of incomplete markets in a more general model based on the absence of double coincidence of wants, a game theoretic concept of equilibrium, like the Core, allows us to prove an equivalence theorem, i.e. to show that indeterminacy is caused by the fact that the returns of financial assets have no direct utility.     

Pricing real assets with costly search

Markets for many real assets are characterized by sequentialsearch followed by bilateral bargaining between matched buyersand sellers. For a category of real assets, the joint, intertemporalvaluation problems of buyers, owners, and sellers and the associatedNash pricing function are solved explicity. In equilibrium,the average transaction price is a noisy, proportional randomwalk, and the liquidity premium is positive for matched owners.Depending on the values of the parameters, the liquidity ofoptimal development with costly search, the optimal exercisepoint, cost of development, and value of the undeveloped assetare calculated analytically. With search, development can occursooner and undeveloped assets have lower market values thanthe standard solution without search.     

Potential cost synergies from banks acquiring real estate brokerage services

National banks and Financial Holding Companies (FHC) solicited permission from the Federal Reserve Board and the Treasury Department to add real estate brokerage and management services to list of permissible business activities under the 1999 Gramm–Leach–Bliley Act (GLB). To date, permission has been denied due to the Community Choice in Real Estate Act, HR 111 and S 98.     

Understanding in‐house transactions in the real estate brokerage industry

About 20% of residential real estate transactions in North America are in‐house transactions, for which buyers and sellers are represented by the same brokerage. We examine to what extent in‐house transactions are explained by agents' strategic incentives as opposed to matching efficiency. Using home transaction data, we find that agents are more likely to promote internal listings when they are financially rewarded and such effect becomes weaker when consumers are more aware of agents' incentives. We further develop a structural model and find that about one third of in‐house transactions are explained by agents' strategic promotion, causing significant utility loss for home buyers.     

A reexamination of corporate sell-offs of real estate assets

This article reexamines the now generally accepted notion that sell-offs of real estate assets provide positive returns for sellers but not for buyers. Following previous research, we use event study methods, but we modify the conventional market model to permit its residuals (unexpected returns) to be described by a time-varying conditional variance. We also differ from previous work in that our sample contains only sell-offs that can be precisely dated. Although we find substantial evidence of time-varying volatility in the unexpected return series, our economic results confirm the conventional viewpoint.     

General equilibrium real and nominal interest rates

We derive the general equilibrium short-term real and nominal interest rates in a monetary economy affected by technological and monetary shocks and where the price level dynamics is endogenous. Assuming fairly general processes for technology and money supply, we show that an inherent feature of our equilibrium is that any real variable dynamics, in particular that of the short-term real interest rate, is driven by both monetary and real factors. This money non-neutrality is generic, as it does not stem from any friction such as price stickiness, or from a particular utility function. Non-neutrality obtains because the ex ante cost of real money holdings is random due to inflation uncertainty. We then analyze in depth a specialized version of this economy in which the state variables follow square root processes, and the representative investor has a log separable utility function. The short-term nominal rate dynamics we obtain encompasses most of the dynamics present in the literature, from Vasicek and CIR to recent quadratic and, more generally, non-linear interest rate models. Moreover, our results pave the way to several new nominal term structures.     

The market for residential real estate brokerage services: Costs of production and economies of scale

Although the market for real estate brokerage services has been the subject of intense scrutiny for many years, little empirical evidence has been forthcoming regarding the performance of this market. This paper employs a translog cost function to model the underlying production function for the residential real estate brokerage industry. The results indicate that, except for very large firms, modest economies of scale persist throughout almost the entire range of output. Our results also indicate that while average firm size is increasing, many real estate firms are too small to take full advantage of the cost reductions possible with a larger scale of operation. Equally important, large firms do not command a competitive advantage over smaller firms, as fer as unit costs are concerned.     

Capital market equilibrium without riskless assets: heterogeneous expectations

The existence theorem of Allingham (Econometrica 59:1169–1174, 1991) for the capital asset pricing model (CAPM) is generalized to the case where agents have heterogeneous expectations on the return distribution and the mean-variance utility functions are quasiconcave. This result is built upon new conditions which are distinct from and weaker than the conditions imposed on the CAPM in the literature.      

Foreign exchange intervention and equilibrium real exchange rates

Monetary authorities intervene in the currency markets in order to pursue a monetary rule and/or to smooth exchange rate volatility caused by speculative attacks. In the present paper we investigate for possible intervention effects on the volatility of nominal exchange rates and the estimated equilibrium behaviour of real exchange rates. The main argument of the paper is that omission of intervention effects – when they are significant – would bias the ability to detect any PPP-based behaviour of the real exchange rates in the long run. Positive evidence for this argument comes from the experience of six Central and Eastern European economies, whose exchange markets are characterised by frequent interventions.     

The equilibrium pricing of exchange rates and assets when trade takes time

When trade takes time, there are systematic deviations of the exchange rate from its Law of One Price value; these depend on the real interest rate in terms of the importable good. There is no systematic tendency for the spot rate to attain its LOP value in the long run. This means that agents in different countries price the same cash flows by using different risk premia, with agents in the ‘foreign’ country pricing the asset by adding a risk premium related to foreign exchange risk.     

Statistical properties of returns: Financial assets versus commercial real estate

This study examines the distribution of commercial real estate returns by region (east, midwest, south, and west), by property type (office, retail, R&D office, and warehouse) and in the aggregate, and compares their distributions to those of financial assets. Nominal and real returns are examined for quarterly, semiannual, and annual periods. The quarterly nominal returns on the financial assets are mostly normal with very little indication of autocorrelation. In contrast, non-normality and autocorrelation are present in most of the nominal quarterly real estate series. The non-normality is greatly reduced when semiannual or annual returns are considered or when the quarterly series are corrected for autocorrelation. The non-normality is also lower for real returns than it is for nominal returns.     

Asset market linkages: Evidence from financial, commodity and real estate assets

We use a general Markov switching model to examine the relationships between returns over three different asset classes: financial assets (US stocks and Treasury bonds), commodities (oil and gold) and real estate assets (US Case-Shiller index). We confirm the existence of two distinct regimes: a “tranquil” regime with periods of economic expansion and a “crisis” regime with periods of economic decline. The tranquil regime is characterized by lower volatility and significantly positive stock returns. During these periods, there is also evidence of a flight from quality - from gold to stocks. By contrast, the crisis regime is characterized by higher volatility and sharply negative stock returns, along with evidence of contagion between stocks, oil and real estate. Furthermore, during these periods, there is strong evidence of a flight to quality - from stocks to Treasury bonds.     

The effect of derivative assets on information acquisition and price behavior in a rational expectations equilibrium

This article shows that introducing derivative assets increasesincentives to collect information about asset payoffs. The increasein information collection makes the price of the underlyingasset more informative and causes the expected price to increase.Extending the model to a dynamic setting with multiple riskyassets, we find the introducing derivative assets for one assetincreases the expected prices of positively correlated assetsand reduces price reaction to future earnings announcements.These findings are consistent with the bulk of the empiricalevidence on the relationship between the introduction of derivativeassets and the behavior of asset prices.     

Dynamic equilibrium and the real exchange rate in a spatially separated world

Two homogeneous stocks of physical capital are located in twodifferent countries, separated by an 'ocean.' They are consumedby local residents, invested in a random production processyielding real returns, or transferred abroad. Under proportionaltransfer costs, trade, consumption and capital imbalances areshown to be persistent. The heteroskedastic process for therelative price of capital in the two countries has a nonlinear,mean-reverting drift. Nevertheless, the conditional probabilityof the price moving from the parity value of unity is greaterthan the probability of it moving toward parity. The real interest-ratedifferential incorporates a simple risk premium.     

券商类机构尝试做市业务实践与发展建议

自2012年证券行业进入放松管制、创新驱动发展的新阶段之后,国内证券公司开始向大力发展资本中介类业务转型。投资银行发挥证券市场资本中介职能,表现为全面满足客户的投融资需求、