National Transaction-based Land Price Indices

Using data on a large sample of land transactions, this paper develops quarterly national land price indices for residential, commercial, and industrial land use categories over the 20?years period from 1991 to 2009. We find significant differences in variability across land uses, with residential exhibiting the most volatility. Our particular interest in this paper is to compare intertemporal land prices with other prominant real estate indices. In all cases, the transaction-based land price indices leads the other indices.     

A Lattice Approach to Pricing Fixed-Rate Mortgages with Default and Prepayment Options

Existing models on the pricing of default and prepayment options in fixed-rate mortgages either use numerical methds or they do not consider refinancing or other transaction costs involved in default and prepayment. We provide in this paper an application of the Boyle [1] lattice model to price secured debt with two risky assets. This model is simple, efficient and capable of considering the major types of transaction costs involved in prepayment and default. Using our model, we estimate the option values under a range of assumptions about the underlying parameters. We also provide some comparisons of the lattice model estimates to other models in the literature.     

Neighborhood Diversity and House-Price Appreciation

This study examines changes in house prices relative to the level of and change in percent racial/ethnic composition for certain counties in Tampa and Orlando, Florida. Repeat-sales transactions between 1971 and 1997 are used to create a constant quality price index for each city. The index for Tampa shows that the average annual house price appreciation was 5.89 percent over the period 1970 through 1997. The index for Orlando shows that the average annual house price appreciation was 5.25 percent over the 1970 through 1997 period. When the Tampa index model is expanded to account for race/ethnicity, household factors, and economic factors, the level of African American population has no significant effect on house-price appreciation; however, the change in percent African American has a negative effect. The level of percent Hispanic population has a positive effect, and the change in percent Hispanic has a positive effect. The expanded Orlando model shows that the level of percent African American population has no significant effect on price appreciation, while the change in percent African American has a negative effect. The level of Hispanic population has a positive effect, while the change in percent in Hispanic has a negative effect.     

Aggregation Bias in Repeat-Sales Indices

The repeat-sales methodology has become a standard approach for estimating real estate price indices. This article examines the underlying assumptions inherent in the repeat sales model and provides an empirical test for both included and omitted variables as sources of aggregation bias. The results indicate that virtually all price indices may be biased, the degree of bias being dependent upon the number of variables examined and the instability of their parameters over time.     

Changes in urban land values: 1836–1970

A model is developed for measuring the return to holding land and those returns are examined using a random coefficient estimation procedure for specific periods from 1836 to 1970. This statistical model provides a mean rate of return for land and a predictor for each time period. The results suggest that the long-term return to holding land is no higher than the rate of return to holding high-grade bonds. For shorter holding periods, the returns vary significantly.     

New post‐ACA insurance data highlights health insurer spending on health care quality

Following the Patient Protection and Affordable Care Act (ACA), annual financial reports by commercial health insurers include more detailed information on a Supplemental Health Care Exhibit. In this new exhibit, insurers illustrate spending on the provision of medical services and associated expenses. These expenses, which were commonly reported as “claims adjustment” and “general administrative” expenses, can now be allocated to several new categories of expenses associated with combatting fraud and improving patient health care quality. This article illustrates that quality improvement expenses have increased significantly in the individual, small group, and large group markets following implementation of the ACA. Of the five types of quality expenses reported, the greatest proportion of spending has been toward the improvement of health outcomes and the most pronounced increase from 2011 to 2017 has been spending toward increased wellness and health promotion activities, which include activities such as wellness assessments and coaching programs for patients with chronic diseases. Given that the ACA was designed not only to broaden access to health insurance but also to improve health, analysis of the allocations to various types of quality improvement activities highlights the private market's contribution to improving the health of the US population.     

CEO Involvement in Director Selection: Implications for REIT Dividend Policy

This paper examines the relationship between CEO entrenchment and dividend policy of real estate investment trusts (REITs). We develop an index for CEO entrenchment using CEO tenure and duality and find that this index has significant impact on dividend policy. We further separate our sample into two sub-groups: REITs with and without nomination committees. Our analyses show a strong positive relationship between CEO entrenchment level and dividend payout for REITs without a nomination committee. In REITs with nomination committees, CEO entrenchment has less influence on dividend policy. We conclude that dividend policy serves as a substitution for other governance mechanisms. Further, our results are consistent with the evidence for other US firms—CEO that are more entrenched pay higher dividends to avoid shareholder sanctions and the threat of takeover.

An Analysis of Seasoned Equity Offerings by Equity REITs, 1991 to 1995

This article examines the valuation effect around the filing and offer dates of seasoned equity offerings by Equity REITs over the period 1991 to 1995. Based on a much larger sample, our finding of a significantly negative reaction to filing announcements corroborates the evidence in Howe and Shilling (1988). Our analyses indicate that the valuation effect is impacted more by the information content of the filing than any tax-based explanations. We find a significantly negative valuation effect on the offer day as well. The effect persists even after adjustment of returns by the bid-ask bounce induced by excessive selling of shares in the secondary market by institutional investors to take advantage of offer price discounts. While we attribute the result partly to order flow imbalance around the offer day, this finding is inconsistent with extant literature merits and further investigation.     

REIT Going Private Decisions

Over the recent decade there was a wave of REITs going private, from an average of about three per year to 40 between 2005 and 2007. Standard corporate finance theory posits that firms go private when there is no longer a positive tradeoff between the expected benefits and the costs of being public, and it provides empirical evidence that going private decisions are motivated by potential gains from leverage, tax benefits, and expected improvements in corporate governance. Given the unique institutional environment for the REIT industry, this paper sheds new light on the going-private decision. Specifically, we examine the determinants of the going-private decision and document announcement wealth changes using a sample of 160 REITs from 1985 to 2009. We find firm performance and agency-related factors significantly impact the probability that a REIT announces to go private. We find that the passage of Sarbanes-Oxley and a proxy for differential performance in the private and public markets have no significant impact on the decision. The announcement day abnormal return is almost 12% and the three-day abnormal return is 15%, magnitudes that are both statistically and economically significant. Variations in the market reaction are associated with lower levels of cash and higher stock price volatility. Overall, we document a new set of going-private factors and wealth impacts for the REIT industry that are unique from those of previous corporate finance literature.     

Buyer brokerage: Experimental evidence

This paper offers an experimental investigation of two commission structures for buyer brokerage. One commission structure is the currently used structure in the industry where both the seller’s broker and the buyer’s broker each receive a percentage of the sales price as their compensation from the seller. In an alternative commission structure, while the seller’s broker still receives a percentage of the sales price from the seller, the buyer’s broker is compensated by the buyer and the compensation is inversely related to the sales price. We find that how the buyer’s broker gets compensated has significant implications. While both commission structures yield a similar probability of reaching an agreement, the alternative commission structure yields a lower price and a longer time to reach an agreement. Furthermore, the alternative commission structure achieves a better alignment of the interests of the buyer and the buyer’s broker without affecting the earnings of the players in the transaction. We also find that the improvement in the alignment of interests is more significant for female buyers than for male buyers. Furthermore, a higher listing price by the seller and a higher initial bid price by the buyer each lead to a significant increase in the negotiated price.