Loss Recoveries,Realized Excess Returns,and Credit Rationing in the Commercial Mortgage Market |
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Authors: | Brian A Ciochetti James D Shilling |
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Institution: | (1) Center for Real Estate, MIT, Cambridge, MA 02139, USA;(2) The Real Estate Center, Depaul University, Chicago, IL 60604, USA |
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Abstract: | In this paper we exploit loan level data combining foreclosure histories with information about the revenues and expenses
associated with the ongoing management and eventual sale of financially distressed loans to estimate the magnitude of realized
excess returns on commercial mortgages. Our findings are striking. We find that average realized excess returns on commercial
mortgages are the lowest at the best times á la Stiglitz and Weiss (Am. Econ. Rev., 71:393–409, 1981). We also find that excess
realized returns on commercial mortgages are low when lenders are swamped with funds (which we measure by the volume of commercial
mortgage commitments) and when promised spreads are low.
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Keywords: | Asset pricing Information and market efficiency Mortgages |
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