Diversification Categories in Investment Real Estate

This paper continues previous work evaluating the benefits of diversification and analyzes the various dimensions within the commercial real estate opportunity set. The database is large and extends through the 1982 downturn in property values. Due to the low levels of systematic risk, current distinctions by region and property type make little sense in a world of costly diversification. More exacting categories combining property type, SMSA growth rate and lease maturity offer promise for more efficient diversification within the real estate portfolio.     

Do People Always Pay Less Than They Say? Testbed Laboratory Experiments with IV and HG Values

Hypothetical bias is a long‐standing issue in stated preference and contingent valuation studies—people tend to overstate their preferences when they do not experience the real monetary consequences of their decision. This view, however, has been challenged by recent evidence based on the elicitation of induced values (IV) in the lab and homegrown (HG) demand function from different countries. This paper uses an experimental design to assess the extent and relevance of hypothetical bias in demand elicitation exercises for both induced (IV) and homegrown (HG) values. For testbed purpose, we use a classic second‐price auction to elicit preferences. Comparing the demand curve we elicit in both, hypothetical bias unambiguously (i) vanishes in an IV, private good context and (ii) persists in HG values elicitation context. This suggests hypothetical bias in preference elicitation appears to be driven by “preference formation” rather than “preference elicitation.” In addition, companion treatments highlight two sources of the discrepancy observed in the HG setting: the hypothetical context leads bidders to underestimate the constraints imposed by their budget limitations, whereas the real context creates pressure leading them to bid “zero” to opt out from the elicitation mechanism. As a result, there is a need for a demand elicitation procedure that helps subjects take the valuation exercise sincerely, but without putting extra pressure on them.     

The Path to Service Encounter Performance in Public and Private ‘Bureaucracies’

This article examines the evolution of building societies against a background of environmental change. By the application of specific analytical measures developed by Ansoff five distinct periods of change can be isolated. Key events in the environment have become progressively more novel, less predictable and costlier to deal with, which, in turn, has necessitated both operational and strategic redirection.     

Sport and common‐sense racial science

This paper confronts the salience of arguments that identify the racial basis of athletic ability. It is argued that these notions of racial athleticism are developed through the interaction between ideas and ways of thinking about human beings and racial groups, reflecting Gramsci's concept of ‘common sense’ that explores the complex correspondence between the presentation of fact and opinion, science and myth. The paper suggests that the mobilization of objective scientific method and subjective plural multiculturalist values within racial athleticism help reinforce its claims to logical validity and moral legitimacy. In response, it is argued that the presentation of the biological basis of race and integrity of cultural difference and particularity within a scientific, intuitive, and principled framework constitutes racial athleticism as a powerful common‐sense idea that cannot be easily dismantled by the simple counter‐presentation of alternative facts. Rather, it is suggested that a progressive response requires building an ethical critique that does not use the mantra of social constructionism to evade corporeality and understandings of embodied difference. It is asserted that the iniquitous applications and palatable racism that lurk beneath the reasonable façade of racial athleticism can only be uncovered through interrogating its common‐sense configuration and analytical weaknesses.     

The role of co-skewness in the pricing of real estate

The current study investigates whether systematic skewness offers an alternative perspective as to why the risk-adjusted returns on real estate should be similar to that for stocks. This is not a trivial issue since an affirmative finding implies that we might be incorrectly measuring real estate risk from both a pricing and a portfolio allocation perspective. A multivariate test of the Kraus-Litzenberger model is used to investigate this skewness proposition with the K-L CAPM tested against several alternative versions of the CAPM. The study finds that the Kraus-Litzenberger model offers additional insights into the measurement of real estate risk. Evidence is also found that both the zero beta and the consumption-oriented CAPM hold, which is consistent with the recent literature in real estate.     

What's In It for Me? CEOs Whose Firms Are Acquired

We study benefits received by target chief executive officers(CEOs) in completed mergers and acquisitions. Certain targetCEOs negotiate large cash payments in the form of special bonusesor increased golden parachutes. These negotiated cash paymentsare positively associated with the CEO's prior excess compensationand negatively associated with the likelihood that the CEO becomesan executive of the acquiring company. Regression estimatessuggest that target shareholders receive lower acquisition premiain transactions involving extraordinary personal treatment ofthe CEO. Target CEOs experience very high turnover rates bothat the time of acquisition and, for those who remain employed,for several years thereafter.     

Agency,Firm Growth,and Managerial Turnover

We study managerial incentive provision under moral hazard when growth opportunities arrive stochastically and pursuing them requires a change in management. A trade‐off arises between the benefit of always having the “right” manager and the cost of incentive provision. The prospect of growth‐induced turnover limits the firm's ability to rely on deferred pay, resulting in more front‐loaded compensation. The optimal contract may insulate managers from the risk of growth‐induced dismissal after periods of good performance. The evidence for the United States broadly supports the model's predictions: Firms with better growth prospects experience higher CEO turnover and use more front‐loaded compensation.     

The Impact of Market Imperfections on Real Estate Returns and Optimal Investor Portfolios

This study investigates the consequences of several imperfections associated with real estate markets on pricing and optimal investor portfolios from a CAPM context. CAPM assumptions are relaxed to recognize illiquidity, the consumption and investment attributes of owner-occupied housing, and a mildly segmented market structure. The study finds that relaxing the CAPM assumptions lead to a separate pricing paradigm for financial assets, income-producing real estate and owner-occupied housing respectively, that a "dividend effect" arises for real estate as the result of illiquidity, and that illiquidity reduces the extent to which investors hold real estate in their portfolios.     

Environmental Valuation – To Use or Not to Use? A Comparative Study of the United States and Europe

Valuation methods have been used for five main purposes in environmental decision-making. Cost–benefit analysis (CBA) of projects, CBA of new regulations, natural resource damage assessment, environmental costing, and environmental accounting. The relatively lower importance attached to economic efficiency in environmental decision-making in most European countries compared to the U.S.A., both legally and in practice, might account for our general finding that there are very few valuation studies in Europe which have served as a decisive basis for environmental policy and regulations. However, with EU's goal to establish environmentally adjusted national accounts and to apply CBA to environmental policy and regulations, time seems ripe for an increased use of valuation techniques in Europe.