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Articles published in real estate, urban economics and finance journals by IRES Affiliated Researchers
*Journals ranked by Impact Factor 2015

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Review of Economics and Statistics

Qian Wenlan and Agarwal Sumit (2016), "Access to home equity and consumption: Evidence from a policy experiment"

Abstract: Using unique consumer financial transactions of more than 56,000 consumers, we study the consumption response to a housing policy experiment in Singapore that resulted in a decrease in access to home equity. Using difference-in-differences analysis, we find a significant negative consumption response to the policy shock. Moreover, the consumption response is concentrated in credit card spending, and is stronger among individuals with limited access to credit market or with high precautionary saving motive. These results suggest that a decrease in access to home equity reduces the role of housing as a self-insurance mechanism for consumption smoothing.

American Economic Review

Sumit Agarwal, Wenlan Qian, "Consumption and Debt Response to Unanticipated Income Shocks: Evidence from a Natural Experiment in Singapore"

Abstract: This paper uses a unique panel data set of consumer financial transactions to study how consumers respond to an exogenous unanticipated income shock. We find that consumption rose significantly subsequent to the fiscal policy announcement: for each dollar received, consumers on average spent 90 cents during the ten months after the program's announcement. There was a moderate decrease in debt. We find a strong announcement effect-consumers increased spending via their credit cards during the two-month announcement period, but they switched to debit cards after disbursement, before finally increasing spending on the credit card in the later months.

Sumit Agarwal, John C. Driscoll, Xavier Gabaix, David Laibson, "Learning in the Credit Card Market"

Abstract: We measure learning and forgetting dynamics using a panel with four million monthly credit card statements. Through negative feedback -- i.e. paying a fee -- consumers learn to avoid future fees. Paying a fee last month reduces fee payment in the current month by 40%. Monthly fee payments fall by 75% during the first four years of a card holder's account life. Consumers forget some of what they learn and exhibit a strong recency effect: knowledge depreciates about 10% or more per month. Higher-income borrowers learn twice as fast, and forget twice as slowly, as lower-income borrowers.

American Economic Review Papers and Proceeding

Sumit Agarwal, Qian W., David Reeb and Tien Foo Sing (2016), "Golf Buddies and Board Diversitiy"

Abstract: We study the participation of women in golf, a predominately male social activity, and its influence on their likelihood of serving on a board of directors. Exploiting a novel dataset of all golf games in Singapore, we find that woman golfers enjoy a 54% higher likelihood of serving on a board relative to male golfers. A woman's probability of serving on the board in a large firm or in a predominately male industry increases by 117% to 125% when she plays golf. In summary, our results suggest that "playing the boys game" facilitates women's directorships in publicly-traded firms.

Journal of Political Economy

Sumit Agarwal, Amromin G. , I. Ben-David, S. Chomsisengphet, T. Piskorski and A. Seru (2016), "Policy Intervention in Debt Renegotiation: Evidence from Home Affordability Modification Program"

Abstract: We evaluate the effects of the 2009 Home Affordable Modification Program (HAMP) that provided intermediaries with sizeable financial incentives to renegotiate mortgages. HAMP increased intensity of renegotiations and prevented substantial number of foreclosures but reached just one-third of its targeted indebted households. This shortfall was in large part due to low renegotiation intensity of a few large intermediaries and was driven by intermediary-specific factors. Exploiting regional variation in the intensity of program implementation by intermediaries suggests that the program was associated with lower rate of foreclosures, consumer debt delinquencies, house price declines, and an increase in durable spending.

Journal of Economic Geography

Qin Yu (2016) "No County Left Behind? The Distributional Impact of High-speed Rail Upgrades in China"

Abstract: Infrastructure investment may reshape economic activities. In this article, I examine the distributional impacts of high-speed rail upgrades in China, which have improved passengers’ access to high-speed train services in the city nodes but have left the peripheral counties along the upgraded railway lines bypassed by the services. By exploiting the quasi-experimental variation in whether counties were affected by this project, my analysis suggests that the affected counties on the upgraded railway lines experienced reductions in GDP and GDP per capita following the upgrade, which was largely driven by the concurrent drop in fixed asset investments. This article provides the first empirical evidence on how transportation costs of people affect urban peripheral patterns.

Energy Economics

Sumit Agarwal, Satyanarain Rengarajan andTien Foo Sing, "Nudges by School Children and Electricity Conservation: Evidence from the 'Project Carbon Zero Campaign in Singapore'"

Abstract: Can children effectively nudge their parents to change their energy consumption behavior? This study sets up a quasi-experiment using the "Project Carbon Zero" campaign, an energy-saving contest in Singapore, to empirically test the effectiveness of school children nudges in bringing electricity conservation messages home and influencing behaviors of their families and neighbors. Based on the 2 km (km) home–school distance as an identification, our results show that families living within 2 km from participating schools (treatment group) used 1.8% less electricity at the block level than other families outside the 2 km school zone (control group) during the contest period. The electricity savings effects are persistent with an estimated marginal savings 1.6% in the post-campaign months. The results imply that policy makers and advocates for energy conservation could use school children nudges in public campaigns, instead of pecuniary interventions, to drive home behavioral changes in electricity conservation of families.

Sumit Agarwal, Rengarajan Styanarain, Tien Foo Sing, and Derek Vollmer (2016) "Effects of construction activities on residential electricity consumption: Evidence from Singapore's public housing estates"

Abstract: This study aims to empirically test the effects of negative environmental externalities (i.e. noise pollution) due to construction activities within half to one kilometer (km) radius and how households react to such externalities by increasing the use of air-conditioners to mitigate noise from the construction work. We use a unique dataset of electricity consumption by public housing residents in Singapore measured at the building level and merge it with the dataset of construction sites for the periods from 2009 to 2011. Using a difference-in-differences approach, we find that electricity consumption by the households living close to the construction sites increases by 6% compared to the households who are not affected by noises from construction sites during the construction periods, after controlling for building and month of the year fixed effects. The results remain robust after controlling for spatial autocorrelated lag and error terms. The economic cost of the construction externalities for each household amounts to approximately S$98 per annum. We also find that the increases in electricity consumption of the affected households were persistent, and the electricity consumption of the affected households did not revert to the pre-construction levels, after the removal of the negative externality.

World Development

Qin Yu and Xiaobo Zhang (2016), "The Road to Specialization in Agricultural Production: Evidence from Rural China."

Abstract: Many rural poor in developing countries live in areas far away from markets and isolation is a key limiting factor to their livelihood. In this paper, we use four waves of a primary panel household survey conducted in 17 remote natural villages in China to study how road access shapes farmers’ production patterns, input use, and rural poverty. We adopt a difference-in-difference approach by comparing the outcomes of the households in villages with and without road access, before and after the introduction of each road. Our results show that access to roads facilitates specialization in agricultural production. In natural villages with better road access, farmers plant fewer numbers of crops, purchase more fertilizer, and hire more labor. Consequently, road connections improve household agricultural income and reduce poverty. In addition, road access significantly increases local nonfarm income for the relatively poor households, but not the rich. Overall, our research provides empirical justification on the importance of rural road on agricultural specialization and poverty reduction, especially in isolated and impoverished regions.

Journal of Urban Economics

Sumit Agarwal, Kang Mo Koo and Tien Foo Sing, "Impact of Electronic Road Pricing (ERP) Charges on Real Estate Prices in Singapore"

Abstract: Since 1998, Singapore has had an Electronic Road Pricing (ERP) system set up with a network of toll gantries to tax vehicles entering designated areas in the city center during peak hours. Using the congestion rate hike with effect from November 1, 2010 as an exogenous shock, we test the effects of the ERP rate hike on retail, office and residential real estate prices. The results show that the November 2010 congestion toll rate increases cause a 19% drop in retail real estate prices within the cordon ERP areas relative to retail real estate prices outside the cordon ERP areas. The results are statistically and economically significant. However, the toll rate hike has no significant impact private office and residential real estate within cordoned ERP areas. The robustness and falsification tests could not reject the negative effects associated with the toll rate hike on retail real estate prices.

Jing Wu, Joseph Gyourko, Yongheng Deng, "Real Estate Collateral Value and Investment: The Case of China"

Abstract: Previous research on the United States and Japan finds economically large impacts of changing real estate collateral value on firm investment that amplified the business cycles of those countries. Working with unique data on land values in 35 major Chinese markets and a panel of firms outside the real estate industry, we estimate investment equations that yield no evidence of a collateral channel effect. Further analysis indicates that China's debt is not characterized by the frictions that give rise to collateral channel effects elsewhere. Essentially, financially constrained borrowers appear able credibly to commit to repay debt in China. While there is no impact on investment via the collateral channel, our results should not be interpreted as implying there will be no negative fallout from a potential real estate bust on the Chinese economy. There likely would be, but through different channels.

Qiang Li, "Language and Urban Labor Market Segmentation: Theory and Evidence"

Abstract: I propose a language theory of labor market segmentation. People of different language origins form separate urban labor submarkets and can switch between submarkets. Two types of wage differentials emerge, namely the Within-Labor-Market Wage Gap and the Within-Language-Group Wage Gap. The average wage in each market and a worker's choice of the labor market depend on the population sizes of the relevant groups. These implications are tested using the 2001 Census of Canada Public Use Microdata. A unique feature of these data is the reported work language, which helps me to identify labor market segments. The empirical evidence supports my theory.

Review of Finance

Sumit Agarwal, Jian Zhang, Tien Foo Sing and Jia He, "Gender Gap in Personal Bankruptcy Risks: Empirical Evidence from Singapore"

Abstract: Gender gap can arise due to various factors—socio-economic, culture, risk attitudes, and macro-economic circumstances. Using a unique dataset that merges motor vehicle events with bankruptcy outcomes and personal data from Singapore, this study finds significant evidence of a gender gap in personal bankruptcy risk. We show that women's odds of being involved in bankruptcy events are 28% of those of men after controlling for demographic variables, housing type, cultural and spatial fixed effects. Using motor vehicle accidents as an instrument, we confirm that the gender gap in bankruptcy risk is mainly driven by risk-taking behavior. The heterogeneity analyses show that culture also explains part of the difference. Chinese, Indian, and Malay women have differential bankruptcy rates in Singapore.

Sumit Agarwal, Yongheng Deng, Chenxi Luo and Wenlan Qian (2016), "The Hidden Peril: The Role of the Condo Loan Market in the Recent Financial Crisis"

Abstract: This paper studies a largely overlooked and important segment of the mortgage market in explaining the recent financial crisis—the condominium loan market, which experienced a 15- fold increase in origination and constituted 15% of the overall residential loan originations from 2001 to 2007. Condominium loan defaults grow at a faster rate than single family (including subprime) loan defaults. Condo loans originated in 2006 are 12% more likely to default within two years than subprime loans of the same cohort in the single family market. Further analysis suggests that the faster default growth and a greater level of defaults in later loan cohorts are consistent with the investor channel explanation: investor borrowers default more, especially when house prices start to decline. We also show that condo defaults have triggered more defaults of the same cohort subprime mortgages at the same location.

Yongheng Deng, Randall Morck, Jing Wu, and Benard Yeung, "China’s Pseudo-monetary Policy"

Abstract: China's monetary stimulation after the global financial crisis rapidly boosted its GDP. We argue that its efficacy derives from state control over its banking and corporate sectors. Beijing ordered state-owned banks to lend and they lent. Beijing ordered centrally-controlled state-owned enterprises (SOEs) to invest and they invested. Our data show much of this investment was highly leveraged purchases of real estate and land prices rises occurred where these SOEs were active buyers. This episode mimics the credit channel for monetary policy, but actually entails internal transfers between arms of the government pressuring on real estate prices upwards.

Annual Review of Economics

Cristian Badarinza, John Y. Campbell and Tarun Ramadorai (2016) "International Comparative Household Finance"

Abstract: This paper reviews the literature on international comparative household finance. The paper presents summary statistics on household balance sheets for 13 developed countries, and uses these statistics to discuss common features and contrasts across countries. The paper then discusses retirement savings, investments in risky assets, unsecured debt, and mortgages.

Transportation Research Part A: Policy and Practice

Siqi Song, Mi Diao, and Chen-Chieh Feng (2016), "Individual transport emissions and the built environment: A structural equation modelling approach"

Abstract: Increasing CO2 emissions from the transport sector have raised substantial concerns among researchers and policy makers. This research examines the impact of the built environment on individual transport emissions through two mediate variables, vehicle usage and vehicle type choice, within a structural equation modelling (SEM) framework. We find that new-urbanism-type built environment characteristics, including high density, mixed land use, good connectivity, and easy access to public transport systems help reduce transport CO2 emissions. Such mitigating effect is achieved largely through the reduced vehicle miles travelled (VMT) and is enhanced slightly by the more efficient vehicles owned by individuals living in denser and more diverse Neighbourhoods, all else being equal. Our research findings provide some new evidence that supports land use policies as an effective strategy to reduce transport CO2 emissions.

Urban Studies

Eric Fesselmeyer, Kien T. Le and Kiat Ying Seah, "Estimating and Decomposing Changes in the White-Black Homeownership Gap From 2005 to 2011"

Abstract: This study evaluates the effects of the recent US housing bust on the White–Black homeownership gap by estimating and decomposing the changes in the distribution of the gap between 2005 and 2011. Our analysis shows that the housing bust did not affect the homeownership gap uniformly. In fact, we find that the gap decreased for households that were the least likely to own and remained unchanged for households that were the most likely to own, and that Black households with around a 50% probability of homeownership were especially vulnerable to the crisis. We also find that the contribution of the residual gap was modest. Changes in the White–Black homeownership gap over the sample period are mainly attributed to changes in household income, whether the household earned dividend, interest or rental income, and marital status, with the extent of their respective influences varying over the homeownership distribution. Our empirical approach reveals distributional information on the determinants of the changes in the homeownership gap at the household level. Such insights have valuable policy implications that would otherwise be concealed in analyses that look only at the conditional mean.

M Diao, Y Zhu, J Zhu (2016) "Intra-city access to inter-city transport nodes: The implications of high-speed-rail station locations for the urban development of Chinese cities"

Abstract: In the high-speed-rail (HSR) construction boom of China, although some cities have upgraded old train stations in inner cities to be compatible with HSR, more cities have built new HSR stations on undeveloped land in the urban periphery. This study investigates the impact of intra-city access to inter-city transport nodes and explores the implications of HSR station locations for the accessibility and residential property values in Chinese cities connected by bullet trains. We find that for the cities with HSR stations in suburbs, the gains in inter-city travel brought by HSR are largely offset by the prolonged intra-city travel time to reach the stations, thus limiting frequent usage of HSR for daily commuting. The inner-city HSR station in Hangzhou shows a positive impact on residential property value in the vicinity, while the suburban HSR station in Guangzhou has not been observed to raise the residential property values noticeably in the short term despite the government's intention to stimulate development in surrounding areas. The research findings show the need for better connections of HSR stations with the city to magnify the accessibility provided by HSR and careful integrated planning to promote desirable urban development outcomes in station areas.

Environment and Planning C: Government and Policy

Jieming Zhu, "Governance over Land Development during Rapid Urbanization under Institutional Uncertainty"

Abstract: Institutional change in the context of gradualist reforms has stimulated economic growth without causing serious social instability in China. Nevertheless, institutional uncertainty has been brought about by the long continuous transition. Institutional uncertainty in the domain of rural collectives compromises the state governance. While the effective state governance over rapid urbanization is absent, and public goods are inadequate in the peri-urban areas as a result, private governance arises spontaneously in the form of gated super-communities in the far suburbs. Though it has met the aspiration of a rising middle-income class for a decent living environment, social segregation and urban sprawl emerge and become serious challenges to society.

Nankai Economic Studies

Yongheng Deng, Xueliang Liu and Jing Wu (2016), "Demongraphic Shock, Marriage and the Housing Market"

Abstract: The persistent and rapid growth of housing price is one of the most important social economic challenges faced in China in recent years. This paper investigates this phenomenon from the demography perspective. We propose a partial equilibrium theoretical model of housing market based on the household lifecycle consumption framework and a Cournot type of monopolistic competition model. Our new model suggests a positive effect of exogenous fertility rate shock on housing demand and then house price. This hypothesis is also supported by the empirical test using a panel data of 30 Chinese provinces. We find that the housing demand from new marriages of the baby boomers from the 80’s is one of the significant factors contributing to the housing price surge after 2004. It is also evidenced that such demographic driven housing boom is highly cyclical; as a result, when the surge of demand from demographic shock comes to an end, we may encounter a contraction of housing demand, and a shock on macroeconomic stability.

Journal of Regional Science

Sun Weizeng, Fu Yuming, Zheng Siqi, (2016), "Local Public Service Provision and Spatial Inequality in Chinese Cities: the Role of Residential Income Sorting and Land-Use Conditions."

Abstract: Spatial inequality refers to unequal access to local public services between high- and low-income households in relation to their residential locations. We examine two hypotheses regarding the role of income sorting and land-use conditions in shaping spatial inequality in Chinese cities, where residents have little direct influence on local public service provision. First, in the presence of resource indivisibility, travel cost, and location-based rationing, scarcity of public-service resources in a city makes access to public services more uneven across Neighbourhoods, thus exacerbating income sorting and spatial inequality in the city. Second, the exacerbating effect of resource scarcity is mitigated by land-use conditions that limit income sorting. Estimates of willingness to pay by households of different income levels for public-service resources across cities corroborate both the exacerbating effect of resource scarcity and the mitigating effect of inclusive land-use conditions.

Sumit Agarwal, Ben-David, Z. and V. Yao (2016), "Systematic mistakes in the mortgage markets and lack of financial sophistication"

Abstract: Institutions often offer a menu of contracts to consumers in an attempt to create a separating equilibrium that reveals borrower types and provides better pricing. We test the effectiveness of a specific set of contracts in the mortgage market: mortgage points. Points allow borrowers to exchange an upfront amount for a decrease in the mortgage rate. We document that, on average, points takers lose about $700. Also, points takers are less financially savvy (less educated, older), and they make mistakes on other dimensions (e.g., inefficiently refinancing their mortgages). Overall, our results show that borrowers overestimate how long they will stay with the mortgage.


Suwei Feng, Qiang Li, (2016) "Evaluating the car ownership control policy in Shanghai: a structural vector auto-regression approach"

Abstract: Beginning in 1986, Shanghai has implemented an interesting car ownership policy, namely an auction of the right to register private cars. In this paper, we propose a structural vector auto-regression (SVAR) approach to characterize the price formation process and to evaluate the performance of the Shanghai auction. We find three key results: (1) the price formation mechanism remained intact when the auction switched from on-site bidding to the two-stage format in 2008; (2) before 2008, short-term price fluctuations could be managed by varying the quota; after 2008, such manipulation ceased to be effective; (3) the number of bidders, or demand, ultimately drove the price in later years, casting doubt on the viability of the new price-controlled procedure that has created more than 250,000 bidders in waiting until April 2016. We also analyze how annual socio-economic variables affect quota, price, and the number of bidders using a simultaneous equations model. Due to data limitations, such an analysis is less conclusive. We argue that the SVAR framework can be improved and applied to other cities in evaluating their car ownership practices.

Transport Policy

Y Zhu, M Diao (2016) "The impacts of urban mass rapid transit lines on the density and mobility of high-income households: A case study of Singapore"

Abstract: Urban rail transit could affect urban development in multiple aspects. Using Singapore as an example, we investigate the impact of planners' and developers' decisions on the density distribution of high-income households in areas around Mass Rapid Transit (MRT) stations and how these households respond to better access to urban rail transit systems. We find that the maximum density permitted by the master plan is only marginally correlated with the distances to MRT stations. Instead, the average unit size tends to be smaller, and the share of small-sized units tends to be higher in new private projects that are close to MRT stations after the new lines are in operation. This indicates that developers, who act mainly in response to the market, intentionally place more housing units in developments closer to MRT stations. Consequently, more upper- and upper-middle-class households that can afford private housing are accommodated in areas with greater accessibility to MRT. By comparing two household travel surveys before and after the opening of the Circle Line, we find that MRT did not change household demographics much in the station area, but there was an evident change in the mode share of trips made by the surveyed households, embodied by lower levels of car dependence and more reliance on MRT.

Environment and Planning

Yi Zhu, Mi Diao, and Gang Fu (2016), "Featured graphic: The evolution of accessibility surface of China in the high-speed-rail era"

Abstract: Numerous studies have investigated the accessibility effect of High Speed Rail (HSR) in China based on projected rail travel time across cities. This study aims to contribute to the literature by visualizing the evolution of the accessibility surface (as measured by economic potential) of China in the HSR era based on real travel time by train between station pairs and analyzing HSR’s potential impacts on the spatial disparity of China. We find that the development of HSR has significantly increased the economic potential of Chinese cities. In the meantime, cities with HSR access and cities in the prosperous eastern region benefitted more from the HSR-induced accessibility improvement compared with non-HSR cities and cities in the hinterland. Therefore, instead of contributing to diminishing regional disparity, HSR may lead to greater spatial unevenness in China.

Journal of Money, Credit and Banking

Sumit Agarwal, John C. Driscoll, David I. Laibson "Optimal Mortgage Refinancing: A Closed Form Solution"

Abstract: We derive the first closed-form optimal refinancing rule: Refinance when the current mortgage interest rate falls below the original rate by at least

In this formula W(.) is the Lambert W-function,

ρ is the real discount rate, λ is the expected real rate of exogenous mortgage repayment,σ is the standard deviation of the mortgage rate, κ/M is the ratio of the tax-adjusted refinancing cost and the remaining mortgage value, and τ is the marginal tax rate. This expression is derived by solving a tractable class of refinancing problems. Our quantitative results closely match those reported by researchers using numerical methods.

Environment and Planning B: Planning and Design

Mi Diao, Yi Zhu, Joseph Ferreira, Jr., and Carlo Ratti (2016), "Inferring individual daily activities from mobile phone traces: A Boston example"

Abstract: Understanding individual daily activity patterns is essential for travel demand management and urban planning. This research introduces a new method to infer individuals' activities from their mobile phone traces. Using Metro Boston as an example, we develop an activity detection model with travel diary surveys to reveal the common laws governing individuals' activity participation, and apply the modeling results to mobile phone traces to extract the embedded activity information. The proposed approach enables us to spatially and temporally quantify, visualize, and examine urban activity landscapes in a metropolitan area and provides real-time decision support for the city. This study also demonstrates the potential value of combining new “big data” such as mobile phone traces and traditional travel surveys to improve transportation planning and urban planning and management.

China Economic Review

Yongheng Deng, Eric Girardin and Roselyne Joyeux (2016), "Fundamentals and the Volatility of Real Estate Prices in China: A Sequential modelling strategy"

Abstract: In a similar way to the stock market, the housing market in China has often been portrayed as highly speculative, giving rise to "bubble" concerns. Over the last decade, residential prices increased every year on average by double digits in Beijing or Shanghai (Deng, Gyourko and Wu, 2012). However many observers and researchers argue that the fundamentals of the housing sector, both sector-specific and macroeconomic, may have been the driving force behind housing price volatility. While existing empirical work exclusively relies on downward-biased official housing prices, this paper uses original high-frequency unit level residential price series for Beijing and Shanghai to test alternative hypotheses about the drivers of house price growth. We propose a sequential research strategy including the construction of hedonic prices, explosive unit root tests (Phillips, Shi and Yu, 2014), the filtering of microstructure noise (Bollerslev et al. 2015) and a Mixed Data Sampling (MIDAS) methodology (Ghysels et al, 2007; Engle et al., 2013) which enables us to document that fundamentals can indeed account for movements in housing price volatility, as well as transaction volume in first‐tier cities such as Beijing and Shanghai.

Jing Wu, Joe Gyourko and Yongheng Deng (2016), "Evaluating the Risk of Chinese Housing Market: What We Know and What We Need to Know"

Real estate is an important driver of the Chinese economy, which itself is vital for global growth. However, data limitations make it challenging to evaluate competing claims about the state of Chinese housing markets. This paper brings new data and analysis to the study of supply and demand conditions in nearly three dozen major cities. We first document the most accurate measures of land values, construction costs, and overall house prices. We then create and investigate a number of supply and demand metrics to see if price growth reasonably can be interpreted as reflecting local market fundamentals. Key results include the following:

(1) Real house price growth has been high, averaging 10% per annum since 2004. However, there is substantial heterogeneity across markets, ranging from 3% (Jinan) to 20% (Beijing). House price growth is driven by rising land values, not by construction costs. Real land values have risen by over 15% per annum on average. In Beijing, the increase has been by a remarkable 27.5% per year (or by 1,036%) since 2004.

(2) There is variation about the strong positive trend in house price and land value growth. Land values fell by nearly one-third at the beginning of the global financial crisis, but more than fully recovered amidst the 2009-2010 Chinese stimulus. More recent growth has been much more modest, with some markets beginning to decline. Quantities of land sales by local governments to private residential developers have dropped sharply over the past two years. The most recent data show transactions volumes down by half or more. This should lead to a reduced supply of new housing units in coming years.

(3) Market-level analysis of short- and longer-run changes in supply-demand balances finds important variation across markets. In the major East region markets of Beijing, Hangzhou, Shanghai and Shenzhen which have experienced very high rates of real price growth, we estimate that the growth in households demanding housing units has outpaced new construction since the turn of the century. However, there are a dozen large markets, primarily in the interior of the country, in which new housing production has outpaced household growth by at least 30% and another eight in which it did so by at least 10%. Regression results show that a one standard deviation increase in local market housing inventory is associated with a 0.45 standard deviation lower rate of real house price growth the following year.

(4) There are no official data on residential vacancy rates in China, but some researchers have reported very high figures (17%+). We develop a new series at the provincial level which yields a much lower vacancy rate on average, but it has been rising—from 5% in 2009 to 7% in 2013.

(5) The risk of housing even in markets such as Beijing which show no evidence of oversupply, is best evidenced by price-to-rent ratios. They are well above 50 in the capital city. Poterba’s (1984) user cost model suggests these levels can be justified only if owners have sufficiently high expectations of future capital gains. Even a modest one percentage point drop in expected appreciation (or increase in interest rates) would result in a drop in prices of about one-third, absent an offsetting increase in rents.

Regional Science and Urban Economics

Sumit Agarwal, Satyanarain Rengarajan and Tien Foo Sing, "School Allocation Rules and Housing Prices: A Quasi-Experiment with School Relocation Events in Singapore"

Abstract: This study uses the unique 2 km distance-based priority school allocation rule in Singapore as an identification to test school relocation effects on housing prices in the 2km school zone. Using the school relocation events that occur during the period from 1999 to 2009 in the quasi-experiment, our main results show that school relocation events cause significant price declines of 2.9% and 6.0% for private houses located within 1km zone and in 1km-2km zone from the old school zone, when the school relocation news were revealed 6 months before the relocation. Larger price declines of 5.5% and 6.9% associated with the loss of a school are found for houses located the 1km and 1km-2km from the school locations, when the school relocation events were revealed 12 months earlier. In the public housing market, we also find that school relocations cause significant welfare losses of between 0.7% and 1.4% for households living within the 1km school zone. The treatment effects of the school relocation events are amplified by the school popularity ranking. The prioritization advantages accorded to the houses located within 1km school zone have significant economic value in the private housing market.

Qin Yu, Hongjia Zhu, Rong Zhu (2016), "Changes in the Distribution of Land Prices in Urban China during 2007-2012"

Abstract: This paper examines the changes in the prices of land parcels in urban China between 2007 and 2012. The average land price in 2012 is found to be 57%, 24% and 41% higher than that in 2007 for residential, industrial and commercial land parcels, respectively. However, this price gap is not uniform throughout the price distribution of each type of land. Using decomposition methods, we disentangle the distributional land price differentials between 2007 and 2012 into a composition effect attributable to the varying land characteristics and a coefficient effect due to changes in the gradients on the underlying land price function. We show that the contributions of the composition effect and the coefficient effect to raw price gaps vary with the part of the price distribution and also differ by the type of land.

Hongjia Zhu, Yongheng Deng, Rong Zhu and Xiaobo He (2016), "Fear of Nuclear Power? Evidence from Fukushima Nuclear Accident and Land Market in China"

Abstract: This paper examines whether the 2011 Fukushima Nuclear Accident (FNA) changed the Chinese public's attitude towards nuclear energy by studying transactions in land markets near nuclear power plants in China. Using a data set that matched the details of all nuclear reactors in China with information on land transactions around them before and after the FNA, we find that the accident had dynamic effects on land markets in China. Land prices within 40 km of nuclear power plants dropped by about 18% one month after the nuclear accident. However, the impact of FNA decreased over the longer term, eventually becoming statistically insignificant. Also, the impacts of the disaster varied with plant characteristics such as operating status, construction year, and size.

Yongheng Deng, Daniel P. McMillen, Tien Foo Sing, "Matching Indices for Thinly-Traded Commercial Real Estate in Singapore"

Abstract: We use a matching procedure to construct three commercial real estate indices (office, shop and multiple-user factory) in Singapore using transaction sales from 1995Q1 to 2010Q4. The matching approach is less restrictive than the repeat sales estimator, which is restricted to properties sold at least twice during the sample period. The matching approach helps to overcome problems associated with thin markets and non-random sampling by pairing sales of similar but not necessarily identical properties across the control and treatment periods. We use the matched samples to estimate not just the mean changes in prices, but the full distribution of quality-adjusted sales prices over different target quantiles. The matched indices show three distinct cycles in commercial real estate markets in Singapore, including two booms in 1995-1996 and 2006-2011, and deep and prolonged recessions with declines in prices around the time from 1999-2005. We also use kernel density function to illustrate the shift in the distribution of house prices across the two post-crisis periods in 1998 and 2008.

Yongheng Deng, Jing Wu, "Economic Returns to Residential Green Building Investment:The Developers' Perspective"

Abstract: While many studies have shown that "green price premiums" accompany the development of green buildings, there is still significant doubt among the public as to the financial viability of investments in energy efficiency. In this paper, we examine this issue from the developers' perspective, and draw on data from Singapore's Green Mark (GM) system, which was introduced in 2005 to evaluate the sustainability and energy-efficiency of buildings. We find that the "green price premium" of residential developments arises largely during the resale phase, relative to the presale stage. The market premium of GM-rated units is about ten percent at the resale stage, compared to about four percent during the presale stage. This implies that, while developers pay for almost all of the additional costs of energy efficiency during construction, they only share part of the benefits associated with such green investments. We also find no evidence that the development of green housing can immediately and significantly improve the corporate financial performance of Singaporean residential developers. These results provide the first evidence of the mismatch that developers face between outlays and benefits in the residential green building sector. This mismatch may impede further development of green residential properties. The emerging green real estate markets should be encouraged to introduce innovative business arrangements and financial products that allow residential developers to capture the future benefits associated with green properties.

Joseph Ooi and T. Le, "The Spillover Effects of New Infill Developments"

Abstract: This paper examines the spillover effects of infill developments, which involve developing vacant or under-used parcels within existing urban areas that are largely developed, on local housing prices. Employing a difference-in-difference specification on a sample of 275 new developments and 55,887 sale transactions of houses in Singapore, we find that infill developments have a positive and persistent impact on local housing prices. The contagion effect is larger for infill developments that are built on teardown sites. The spillover effect can also be traced to the overpricing of new homes by developers. Overall, the evidence indicates that developers act as price leaders and contribute significantly to price discovery in the local housing market.

Economic Modelling

Liow, K.H. and Newell, G. (2016), "Real estate global beta and spillovers: an international study"

Abstract: This study investigates the dynamics of real estate global beta and international spillovers among 16 public real estate markets for the period of 1995–2015. We find that international public real estate markets are characterized by a varying degree of increasing global stock market linkages during the financial crises. Although increases in real estate global betas are linked to conditional correlation increases and market integration over time, the relative conditional standard deviation (real estate/global stock) is more important in driving the changes in real estate global betas over time. In an international environment, the real estate global beta spillovers are substantial and time-varying across the countries examined. There are institutional and economic implication associated with real asset securitization that can influence the changes in real estate global betas and their spillovers in international financial markets.

Journal of Urban Affairs

Lee Kwan Ok, George Galster and Richard Smith (2016), "Neighborhood Trajectories of Low-Income U.S Households: An Application of Sequence Analysis"

Abstract: Neighbourhood poverty experienced over time by low-income households is a topic of increasing interest and public policy importance. We employ sequence analysis of Neighbourhood poverty rates to identify distinct patterns among the 18- to 22-year longitudinal residential trajectories of 389 low-income households in the United States who formed households during 1988–1992, as represented in the Panel Study of Income Dynamics. Our most striking finding is the important role of poverty in their first neighbourhood to the probability that low-income households ultimately reside in Neighbourhoods with higher poverty rates. Contrary to conventional wisdom, there are a wide variety of Neighbourhood poverty trajectories that low-income American households experience. However, those with felicitous Neighbourhood trajectories were almost entirely White households. The majority of Blacks formed households in high-poverty Neighbourhoods and were unlikely to live in any other sort of Neighbourhood for the next two decades when they are typically raising children. In addition, both in-place Neighbourhood changes and residential mobility have likely led to this racial variation in low-income Neighbourhood trajectories. We contribute to the evidence base about the role of place in perpetuating socioeconomic and racial inequalities.

Lee Kwan Ok (2016), "Temporal Dynamics of Racial Segregation in the U.S.: An Analysis of Household Residential Mobility"

Abstract: This is the first study of temporal segregation dynamics based on the full analysis of household residential mobility, including non-moves and intra- and inter-Neighbourhood moves in the United States over the last four decades (1971–2009). Analysis results demonstrate the decreases in both white flight and white avoidance over time. Whites stayed shorter in black-white Neighbourhoods than in predominantly white Neighbourhoods until 1990, but this has been no longer significant during the past two decades. The tendency that whites are less likely to move to racially homogeneous Neighbourhoods than moving within or across racially mixed Neighbourhoods was significant only after 1990. These two results explain the aggregate-level segregation trend that black-white Neighbourhoods have experienced the most significant drop in the probability of transitioning into racially homogeneous Neighbourhoods and that the share of racially mixed Neighbourhoods has significantly increased over time. Analysis results further suggest that increasing racial diversity and the reduction in racial segregation in metropolitan areas have likely contributed to changes in whites' residential mobility.

Real Estate Economics

Ling, D., Joseph T.L. Ooi and R. Xu (2016), "Asset Growth and Stock Performance: Evidence from REITs"

Abstract: In this article, we examine the impact of asset growth rates on the future stock performance of 308 publicly traded real estate investment trusts (REITs). We observe that fast-growing REITs tend to underperform slow growing REITs. However, we find evidence that the growth effect is significantly less negative for REITs selling at a premium to net asset value. In addition, we observe the asset growth effect only in the subsample of REITs that engages in equity issuance over the next 12 months. The combined evidence suggests contemporaneous equity dilution, which has not been considered in previous studies, may provide an explanation for the underperformance of fast-growing firms.

Lee Kwan Ok and Masaki Mori, "Do Conspicuous Consumers Pay Higher Housing Premiums? : Spatial and Temporal Variation in the U.S."

Abstract: This study is the first to examine the relationship between conspicuous demand and housing price dynamics. We hypothesize that conspicuous consumers would want high-end homes to signal their wealth and this housing consumption behavior would induce greater deviations from fundamental house prices. We test this by using a unique dataset that matches the consumers' appetite for nonhousing luxury goods from Google Insights for Search to housing premiums that they pay for high-end houses in U.S. Metropolitan Statistical Areas (MSAs) during 2004–2011. The estimation results demonstrate that controlling for a wide range of MSA demographic and economic characteristics, conspicuous demand has a significant, positive relationship with housing premiums. This relationship varies spatially and temporally. Conspicuous demand has a stronger relationship with a price increase in high-end homes in MSAs with a steady, higher housing premium than in MSAs with a volatile, lower premium during the boom period. In MSAs with a steady, higher housing premium, the relationship remains significant even during the bust period, potentially contributing to maintaining higher housing premiums.

Mi Diao, Yu Qin and Tien Foo Sing, "Negative Externalities of Rail Noise and Housing Values: Evidence from the Cessation of Railway Operations in Singapore"

Abstract: The governments of Malaysia and Singapore reached a landmark agreement in May 2010 to end the operations of nearly 80-year-old railway lines and stations in Singapore. In our study, the cessation of the railway services operated by Keretapi Tanah Malaya (KTM), a firm owned by the Malaysian government, with effect from July 1, 2011 is used in a quasi-experiment design to test the effects of the removal of train noise externalities on real estate values. Based on the nonlanded private housing transactions data from January 2005 to June 2013, we find that average prices for houses located within a 400-m boundary from the railway lines increased by 3.5% relative to prices for houses located outside the 400-m boundary after the cessation agreement has been announced. The removal of train noise externalities increases housing prices in the affected area by 13.7% on average in the postcessation period of the KTM railway services. Realized economic benefits associated with the railway services cessation were estimated at S$0.36 billion based on houses sold in the post cessation period of the KTM railway services.

Xudong An, Yongheng Deng, Jeffrey Fisher and Maggie (Rong) Hu (2016), "Commercial Real Estate Rental Index: A Dynamic Panel Data Model Estimation"

Abstract: Using the actual quarterly rental income generated in the years between 2001 and 2010 by over 9,000 NCREIF commercial properties, we construct a commercial real estate rental index and estimate the time series properties (e.g., mean‐reversion speed and volatility) of market‐wide rental growth using a dynamic panel data model. The dynamic panel data model has several advantages over a standard hedonic regression. In addition, we incorporate age effects into our panel data model, and by doing so we correct the age bias in the repeated sales method and in the simple average method. Our estimates show that rental growth is cyclical but it generally lags behind broader economic growth. Surprisingly, the long‐term average rental growth is significantly lower than what is usually perceived, and the volatility of rental growth can be significantly under estimated when the conventional methods are adopted. We also find significant cross‐property type and cross‐region variations in the rental adjustment process. In contrast to the existing literature, we find a strong negative relation between rental growth and cap rate, and that this relation is significantly stronger than that between NOI growth and cap rate. Finally, we establish an empirical relation between price return and rental growth in the commercial real estate market.

Wenlan Qian "Why Do Sellers Hold Out in the Housing Market? An Option-based Explanation"

Abstract: In the residential housing market, home owners are reluctant to sell in a declining market. We build a model which focuses on the embedded call option associated with home ownership that allows owners to delay the (irreversible) sale. When prices are low, the (opportunity) cost of a sale, i.e., a higher implied gain from a future sale, likely exceeds its immediate trade benefit and an owner is better off waiting for market conditions to improve. The model also highlights the importance of supply conditions: a more constrained supply is associated with a longer delay. Using state-level residential housing data, we find evidence consistent with the model. Transaction volume is increasing (decreasing) in the rental growth rate (volatility) in the cross section; their effects are amplified in areas with low supply elasticities, and in times with low market prices. Overall, this paper provides a rational explanation for delayed trading decisions in the housing market.

Xudong An,Yongheng Deng, Jeffrey D. Fisher, Maggie(Rong) Hu "Commercial Real Estate Rental Index: A Dynamic Panel Data Model Estimation"

Abstract: Using the actual quarterly rental income generated in the years between 2001 and 2010 by over 9,000 NCREIF commercial properties, we construct a commercial real estate rental index and estimate the time series properties (e.g., mean-reversion speed and volatility) of market-wide rental growth using a dynamic panel data model. The dynamic panel data model has several advantages over a standard hedonic regression. In addition, we incorporate age effects into our panel data model, and by doing so we correct the age-bias in the repeated sales method and in the simple average method. Our estimates show that rental growth is cyclical but it generally lags behind broader economic growth. Surprisingly, the long-term average rental growth is significantly lower than what is usually perceived, and the volatility of rental growth can be significantly underestimated when the conventional methods are adopted. We also find significant cross-property type and cross-region variations in the rental adjustment process. In contrast to the existing literature, we find a strong negative relation between rental growth and cap rate, and that this relation is significantly stronger than that between NOI growth and cap rate. Finally, we establish an empirical relation between price return and rental growth in the commercial real estate market.

Yuen Leng Chow, Joseph Ooi "First-Price Sealed-Bid Tender versus English Open Auction: Evidence from Land Auctions"

Abstract:This paper compares which auction format - first-price sealed-bid tender versus ascending English open auction - generates higher revenue for seller. Using a unique data for prepared vacant land sales that is close to a set of data generated by a natural economic experiment in a real-world business setting and different estimation methods to account for the presence of an endogenous discrete mechanism choice variable, our results show a statistically significant difference in land prices. The first-price sealed-bid tender generates a lower land price, in the range of 1.2% to 9.6%. Our results validate the theoretical prediction that open auctions result in higher prices because bidders can infer other bidders' information by observing their bids in the common value auction paradigm.

Wenlan Qian "Why Do Sellers Hold Out in the Housing Market? An Option-based Explanation"

Abstract: In the residential housing market, home owners are reluctant to sell in a declining market. We build a model which focuses on the embedded call option associated with home ownership that allows owners to delay the (irreversible) sale. When prices are low, the (opportunity) cost of a sale, i.e., a higher implied gain from a future sale, likely exceeds its immediate trade benefit and an owner is better off waiting for market conditions to improve. The model also highlights the importance of supply conditions: a more constrained supply is associated with a longer delay. Using state-level residential housing data, we find evidence consistent with the model. Transaction volume is increasing (decreasing) in the rental growth rate (volatility) in the cross section; their effects are amplified in areas with low supply elasticities, and in times with low market prices. Overall, this paper provides a rational explanation for delayed trading decisions in the housing market.

Journal of European Real Estate Research

Liow, K.H., "Linkage between cross-coiuntry business cycles, cross-country stock market cycles and cross-country real estate market cycles"


This research aims to investigate whether and to what extent the co-movements of cross-country business cycles, cross-country stock market cycles and cross-country real estate market cycles are linked across G7 from February 1990 to June 2014.


The empirical approaches include correlation analysis on Hodrick–Prescott (HP) cycles, HP cycle return spillovers effects using Diebold and Yilmaz's (2012) spillover index methodology, as well as Croux et al.'s (2001) dynamic correlation and cohesion methodology.


There are fairly strong cycle-return spillover effects between the cross-country business cycles, cross-country stock market cycles and cross-country real estate market cycles. The interactions among the cross-country business cycles, cross-country stock market cycles and cross-country real estate market cycles in G7 are less positively pronounced or exhibit counter-cyclical behavior at the traditional business cycle (medium-term) frequency band when "pure" stock market cycles are considered.

Research limitations/implications

The research is subject to the usual limitations concerning empirical research.

Practical implications

This study finds that real estate is an important factor in influencing the degree and behavior of the relationship between cross-country business cycles and cross-country stock market cycles in G7. It provides important empirical insights for portfolio investors to understand and forecast the differential benefits and pitfalls of portfolio diversification in the long-, medium- and short-cycle horizons, as well as for research studying the linkages between the real economy and financial sectors.


In adding to the existing body of knowledge concerning economic globalization and financial market interdependence, this study evaluates the linkages between business cycles, stock market cycles and public real estate market cycles cross G7 and adds to the academic real estate literature. Because public real estate market is a subset of stock market, our approach is to use an original stock market index, as well as a “pure” stock market index (with the influence of real estate market removed) to offer additional empirical insights from two key complementary perspectives.

Asian Economic Policy Review

Qin Yu (2016) "China's Transport Infrastructure Investment: Past, Present and Future."

Abstract: China has been heavily investing in transportation infrastructure since the 1990s. Consequently, connectivity has been significantly improved, both within China and between China and other countries. Such large-scale investments have been made possible by various financing mechanisms from the central government, local governments, and the private sector. Research findings generally indicate that these infrastructure investments bring economic prosperity to the country, affect the distribution of economic activities, reduce poverty to a certain extent, and promote economic integration. The future trends of connectivity changes in China and relevant policy recommendations are also discussed in this paper.

Journal of Real Estate Research

Liow, K.H. and Ye, Q., "Switching regime beta analysis of global finnacial crsis: evidence from international public real estate markets"

Abstract: Employing Markov-switching regime beta models on eight developed public real estate markets, we examine whether the recent global financial crisis has caused significant changes in the excess return distribution, volatility spillover and the link between them and the world market from January 2000 to June 2015. There is a significant increase in the average return, variance and world market linkage parameters for the three selected European markets in recent years. However, the null hypothesis of stable/decreased linkages with the world market indices in both volatility regimes during the post-crisis period cannot be rejected for the three Asian markets examined.

Journal of Property Investment and Finance

Liow, K.H., "Global financial crisis and cyckicak co-movements of Asian finnacial markets"


– The purpose of this paper is to investigate the cross-spectra of stock, real estate and bond of ten selected Asian economies in the pre- and post-global financial crisis periods to detect whether there is greater cyclical co-movement post-financial crisis, and whether any observed increased co-movement measures the outcomes of contagion or integration.


– Co-spectral approach is the proper econometric tool to deliver economic insight for this research.


– Results indicate that Asian stock markets, and to a lesser degree, bond and real estate markets are more correlated post-financial crisis. Similarly, Asian financial markets have experienced increased co-movements with the US financial markets post-financial crisis. Moreover, these observed increased co-movements measure the outcomes of contagion in some cases of within-asset and cross-asset classes, as well as for some cross-US-Asian asset factor relationships along the high-frequency components of between two and four weeks. The stock markets are the most contagious, followed by the real estate markets and bond markets.

Research limitations/implications

– The results provide short-term investors with additional co-movement information at higher frequencies in order to identify short-term fluctuations of different asset classes. The empirical study also underscores the role of Asian real estate in investment portfolios in a mixed real estate, stock and bond context from a frequency domain perspective.

Practical implications

– The practical implication of this research is that benefits to investors from international diversification may not be as great during the present time compared to previous periods because financial/asset market movements have become more correlated. However, it does not imply the complete absence of diversification benefits. This is because although cyclical correlations increase in the short run, many of the values are still between low and moderate range, indicating that some diversification benefits may still be realized.


– In advancing the body of knowledge in international financial markets, this research is probably the first study to consider a multi-asset class portfolio context that includes stock, real estate and bond across the ten Asian economies and the USA in a single study. The frequency domain analysis conducted in this paper adds to the understanding of real estate, stock and bond market co-movement, integration and contagion dynamics, as well as the Asian cross-asset factor and US-Asian asset factor relationships in global mixed-investing environment.

Journal of Real Estate Finance and Economics

Tang C.K., M. Mori, S.E. Ong and Joseph T.L. Ooi (2016), "Debt Raising and Refinancing by J-REITs: Information Content in a Credit Crunch"

Abstract: This paper examines the information content of debt raising and refinancing activities of Real Estate Investment Trusts (REITs) in normal and tight credit markets. Based on a sample of 340 debt announcements made by REITs in Japan (J-REITs) between 2002 and 2011, we observe that they are associated with a positive stock price reaction, averaging 1.05 % over a 4-day window. Stratifying the sample into debt raising and debt refinancing, we find strong evidence that the positive economic gains associated with debt announcements flowed from the pool of debt refinancing announcements. They registered a significant mean return of 1.20 % over the 4-day window, as opposed to 0.07 % for the pool of debt raising activities. Further investigation shows that the positive market reaction to debt refinancing is more pronounced during the credit crunch of 2007 to 2009. Although debt refinancing does not lead to any change in the firm’s capital structure, it still contains valuable information about the firm’s prospect, especially in tight credit markets.

Xu R.R., Y.L. Chow and Joseph T.L. Ooi (2016), "A Relook at the Effects of Divestiture in the Presence of Agency Conflict"

Abstract: We analyze property subsidiary sell-offs in China to examine her market reaction to firms’ divestiture decisions. Overall, the response from the stock market is neutral. However, detailed analysis reveals that the market reacts differently to property subsidiary sell-off announcements by state-owned enterprises (SOEs) and non-SOEs. Consistent with findings from extant literature, we find statistically positive market returns associated with non-SOE sell-off announcements. However, we find statistically negative market returns associated with SOE sell-off announcements. We suggest that this divergent market reaction is influenced by the institutional feature of the Chinese market and is consistent with the high agency costs associated with state ownership.

Downs D., Joseph T.L. Ooi, WC Wong and SE Ong, "Related Party Transactions and Firm Valuation: Evidence from Property Markets in Hong Kong, Malaysia and Singapore"

Abstract: This paper offers new evidence as to how RPTs can be value enhancing for minority shareholders. In doing so, we address an ongoing theoretical tension in the related party transaction (RPT) literature by focusing on real estate investment trusts (REITs) in Asia. The empirical evidence is mixed in the corporate finance literature on whether RPTs create or destroy firm value. On average, REITs in our sample engaged in RPTs amounting to 5.4 % of total assets, annually, between 2003 and 2010. This is not a trivial amount and is nearly double the 2.8 % RPT rate for U.S. industrial firms. We identify three main channels for REIT RPTs: real estate asset acquisitions from related parties (57.4 %), income earned from related parties (22.2 %) and management fees paid to related parties (14.8 %). The identification strategy we employ relies on two distinct methodologies when examining RPTs and firm value: a multivariate regression approach and, secondly, an exogenous wealth effects test for RPT announcements. Overall, the results suggest that REIT managers and sponsors do not expropriate wealth from their minority shareholders through RPTs. We find evidence that an ad hoc acquisitions pipeline from sponsor to REIT generally drives the value and wealth proposition, although the impact could be reversed in a credit crisis.

Yongheng Deng, Maggie (Rong) Hu and Anand Srinivasan (2016), "Information Asymmetry & Organizational Structure: Evidence from REITs"

Abstract: We test for the differences in information asymmetry across two organizational forms (external and internal) in the REIT industry. We find significant differences with external REITs being significantly more transparent relative to internal REITs, and these differences are reflected in the loan contract terms and loan syndicate structure of loans made to these two types of REITs. We find that the relatively more transparent externally advised REITs are offered more favourable loan contracts in terms of lower loan rates and lower likelihood of collateral requirement. Further, loans to external REITs have syndicates that are larger in size and the lead lender retains a smaller portion of the loan, reflecting lower information asymmetry.

Mori Masaki and Tang TC (2016), "Sponsor Ownership in Asian REITs."

Abstract: This study examines the relationship between sponsor ownership and firm performance proxied by firm value, operating cash flow, and dividend policy with Asian real estate investment trusts (REITs) in Japan, Hong Kong, Malaysia, and Singapore for the period from 2002 to 2012, focusing on both the incentive alignment effect and the entrenchment effect. Our study sheds new light on effective corporate governance for Asian REITs that are prone to agency problems. Such agency problems arise from the inequitable distribution of power to sponsors that results from the external management structure. The findings suggest that larger sponsor ownership aligns the interests of sponsors and minority shareholders and enhances the performance of Asian REITs, while such an effect diminishes as sponsors become more entrenched. We find that the incentive alignment effect and entrenchment effect are primarily driven by developer sponsored REITs. Also evident is that the presence of institutional investors mitigates agency problems and increases firm performance.

Yongheng Deng, Erik Devos, Shofiqur Rahman and Desmond Tsang (2016), "The Role of Debt Covenants in the Investment Grade Bond Market -- The REIT Experiment"

Abstract: In general, investment grade bonds do not offer covenant protection. However, in the case of Real Estate Investment Trusts (REITs), investment grade REITs tend to include a covenant package that outlines limits on leverage and requires maintaining certain fixed charges and interest coverage ratios. This unique debt financing structure of REITs offers a natural environment to examine the importance and the need of debt covenants in the investment grade bond market. Our research aims to answer the following questions: 1. How common are debt covenants in the investment grade REIT bond market? 2. Are debt covenants binding in this market? 3. Do debt covenants affect the cost of debt? Our findings indicate that, in the REIT market, debt covenants are indeed common practice among investment grade REITs and, surprisingly, we find higher use of covenants by investment grade REITs compared to non-investment grade REITs. We show that debt covenants are seldom binding in this market, as investment grade REITs choose covenant provisions based on accounting ratios for which they seem to have enough slack. Finally, the cost of debt is lower when these investment grade REIT bonds are issued with covenants.

Chiang, Ming-Chu, Tsai I-Chun and Sing Tien Foo, (2016) "Spillover Risks in REITs and other Asset Markets"

Abstract: Based on Diebold and Yilmaz's (International Journal of Forecasting 28:57–66, 2012) methodology, we estimate three return spillover indices in a four-asset system comprising equity REIT (EREIT), mortgage REIT (MREIT), stock, and bond for the sample period from January 1972 to September 2014. We find that the total return spillover risks account for about one-third of the total return variance, on average, in the four-asset system. When we add commercial real estate (CRE) to the system, but for a shorter sample period from February 1998 to September 2014, we estimate an average total return spillover risk of 28.0%. In an extended Fama-French's five-factor CAPM framework, we find that the net return spillover risks have significant and negative effects on EREIT and MREIT returns, but positive effects on bond return. We infer that during the period of high oil price volatility from 1978 to 1986, bond market, as a net "receiver" of market risks, increased its risk premiums in response to high spillover risks from other market. However, in the post-subprime crisis period, large spillover risks from the stock market, which is a net “transmitter” of risks, decreased EREIT and MREIT returns. We also find that CRE return is not affected by spillover risks from other markets. Institutional investors should thus not neglect spillover risks when constructing asset allocation strategies that include assets other than CRE.

Yongheng Deng, Jing Wu "Intercity Information Diffusion and Price Discovery in Housing Markets: Evidence from Google Searches"

Abstract: We provide an innovative measure of information flow in Chinese housing markets based on search records from the Internet search engine Google. The measure depicts a substantial flow of house-price related information from national "superstar" cities, such as Beijing and Shanghai, and regional "star" cities, such as Tianjin and Chongqing, to other "normal" cities. The empirical results based on Granger causality test and turning point detection analysis both suggest that such information diffusion is a key factor that influences the intercity house price discovery process in the short run. The "superstar" and "star" cities lead the country in terms newly-built house prices changes in the sample period between 2006 and 2011.

Xudong An, Yongheng Deng, Joseph B. Nichols and Anthony B. Sanders, "What is Subordination About? Credit Risk and Subordination Levels in Commercial Mortgage-backed Securities (CMBS)"

Abstract: Subordination is designed to provide credit risk protection for senior CMBS tranches by allocating the initial credit losses to the more junior tranches. Subordination level should in theory reflect the underlying credit risk of the CMBS pool. In this paper, we test the hypothesis that subordination is purely about credit risk as intended. We find a very weak relation between subordination levels and both the ex post and ex ante measures of credit risk, rejecting our null-hypothesis. Alternatively, we find that subordination levels were driven by non-credit risk factors, including supply and demand factors, deal complexity, issuer incentive and a general time trend. We conclude that contrary to the traditional view the subordination level is not just a function of credit risk. Instead it also reflects the market need of a certain deal structure and is influenced by the balance of power among issuers, CRAs and investors.

Tang C.K., Masaki Mori, Seow-Eng Ong and Joseph Ooi, "Debt Raising and Refinancing by J-REITs: Information Content in a Credit Crunch"

Abstract: This paper examines the information content of debt raising and refinancing activities of Real Estate Investment Trusts (REITs) in normal and tight credit markets. Based on a sample of 340 debt announcements made by REITs in Japan (J-REITs) between 2002 and 2011, we observe that they are associated with a positive stock price reaction, averaging 1.05% over a four-day window. Stratifying the sample into debt raising and debt refinancing, we find strong evidence that the positive economic gains associated with debt announcements flowed from the pool of debt refinancing announcements. They registered a significant mean return of 1.20% over the four-day window, as opposed to 0.07% for the pool of debt raising activities. Further investigation shows that the positive market reaction to debt refinancing is more pronounced during the credit crunch of 2007 to 2009. Although debt refinancing does not lead to any change in the firm's capital structure, it still contains valuable information about the firm's prospect, especially in tight credit markets.

Masaki Mori, Joseph Ooi and Woei-Chyuan Wong, "Do investor demand and market timing affect convertible debt issuance decisions by REITs?"

Abstract: The unique regulatory environment of REITs casts doubt on the traditional theoretical process by which REIT managers base their convertible debt issuance decisions on issuer condition and prospects. Anecdotal evidence shows that REITs may have catered to demand by investors, including a demand by convertible bond arbitrageurs when issuing convertible debt. This study examines the rationale behind convertible debt issuances by REITs, focusing on the possible impacts of investor demand and market timing. The results suggest that investor demand significantly affects convertible debt issuance decisions by REITs while certain unknown factors appear to have contributed to the sudden increase of convertible debt offerings in 2006 and 2007. REITs also time the market to conditions in the public debt market. The results only partially support the offered risk-shifting, risk-uncertainty, backdoor-equity, and sequential-financing hypotheses.

Xudong An, Yongheng Deng, Joseph B. Nichols and Anthony B. Sanders, "Local Traits and Securitized Commercial Mortgage Default"

Abstract: We expand on the standard commercial mortgage default model and create a new model by looking beyond the usual factors of option value, insolvency, property type, region, originator type, state foreclosure laws and macroeconomic measures. The new model incorporates measures of local economic conditions, specifically MSA-level commercial property market conditions, county level unemployment, and local home price appreciation. We estimate our new model using a dataset containing the performance histories of over 30,000 CMBS loans that were originated between 1998 and 2012. We find that those local trait variables affect the default rate of CMBS loans significantly and provide improved explanatory power over the standard model. We further explore the impact of local home price measures by comparing the explanatory power of lagged and contemporaneous home price indexes, comparing the power of home price indexes at the state, county, and zip-code level, examining the interaction of home price indexes with commercial property type, looking at the impact of home price indexes over time, and at the impact of introducing local commercial land price indexes. We find that local residential house price-related measures provide a high quality and high frequency signal of local market conditions.

Ming Pu, Gang-Zhi Fan, and Yongheng Deng, "Information Asymmetry and the Breakeven Determination of Loan Limits for Reverse Mortgages"

Abstract: Since the loan limit of a reverse mortgage is a major concern for the borrower as well as the lender, this paper attempts to develop an option-based model to evaluate the loan limits of reverse mortgages. Our model can identify several crucial determinants for reverse mortgage loan limits, such as initial housing price, expected housing price growth, house volatility, mortality distribution, and interest rates. We also pay special attention to the important implication of information asymmetry between lenders and elderly borrowers with respect to the beliefs on housing market risk. In reverse mortgage markets, elderly borrowers typically hold far less or no information about the characteristics associated with lenders' underlying property pools compared to the lenders. Such information asymmetry leads these two categories of market participants to generate different perspectives on the risk of the collateralized properties, which can be identified to be important in determining the maximum loan amounts in this analysis. We further find that the maximum loan amount of a reverse mortgage decreases in the correlation between the systematic return and the idiosyncratic return on its underlying housing property but increases with the number of the pooled reverse mortgages.

Jing Wu, Yongheng Deng and Hongyu Liu, "House Price Index Construction in the Nascent Housing Market: The Case of China"

Abstract: Most existing house price index construction methods are developed mainly based on repeat-sales residential housing data that each unit has multiple transaction records, and are not necessarily suitable for the nascent housing markets where a predominant portion of housing transactions are new units. Using the booming market in China as an example, we evaluate and compare the performances of three most common house price measurement methods in the newly-built housing sector, including the simple average method without quality adjustment, the matching approach with the repeat sales modeling framework, and the hedonic modeling approach. Our analyses suggest that the simple average method fails to account for the complex-level quality changes over time of sales during our sampling period, and the matching model adopted by China's government index fails to control for the developers' pricing behaviors, hence both indices are downward biased. Based on this finding, we apply a hedonic method, that allows up to control for quality changes over time of sales and developers pricing behaviors, to 35 major newly-built housing markets and provide the first multi-city constant-quality house price index in China. The new index reveals that the current Chinese housing market is facing a greater risk of mispricing than reported by the existing official metrics.

Jun Chen and Yongheng Deng, "Commercial Mortgage Workout Strategy and Conditional Default Probability: Evidence from Special Serviced CMBS Loans"

Abstract: This study recognizes that commercial mortgage default is not a one-step process and examines a previously under explored aspect in the whole default process, that is the stage between the initial delinquency and default. We distinguish the servicers' behavior from the borrowers' behavior. A multinomial logit model is applied to analyze the servicers' choice of workout options and a proportional hazard model is applied to analyze the borrower's default decision-making process under time-varying conditions. We find that cash flow condition is the most significant factor in the servicers' decision making process. We also find that borrowers make default decisions based upon both the equity position in the mortgage and the cash flow condition in the space market. Key real estate space market variables, such as market-level vacancy rates, also provide useful information in explaining commercial mortgage defaults. We find that special service seems to be successful in reducing the probability that a troubled loan will default. Finally, sensitivity analysis shows nontrivial economic significance of the impact of explanatory variables, real estate market variables in particular have the most significant impact on the pricing of special-serviced loans.

Annals of Regional Science

Daxuan Zhao and Tien Foo Sing, "Air Pollution, Economic Spillovers and Urban Growth in China"

Abstract: This paper empirically tests the interactive effects of air pollution and economic spillovers in Chinese cities from 2003 to 2010. The results show that Chinese cities benefit from the economic spillovers from surrounding cities, but bear the costs of negative air pollution externalities created by neighboring cities. We use wind direction and the administrative boundaries of provinces to disentangle possible multicollinearity between air pollution emissions and economic spillovers across cities. However, the results could not reject the growth-restricting effects of air pollution from neighboring cities. The results imply that the development of a city surrounded by polluters is likely to be constrained.


M Diao, D Leonard, TF Sing (2016) "Estimating the Impact of Urban Rail Transit Network Expansion on Residential Property Values: A Local-Polynomial-Regression Approach"

Abstract: Using the opening of a new urban rail line event in Singapore as a quasi-natural experiment, we empirically test if accessibility to nearby rail transit station has marginal economic impact on non-landed private housing values. Within a difference-in-differences modelling framework, we use a local-polynomial-regression approach to provide a better identification of the impact zones surrounding urban rail transit stations. We find that the new urban rail line opening increases the values of non-landed private properties located within 600 meters measured by the network distance from new stations by 6.3% relative to housing prices in the control group, after controlling for property attributes, local amenities, as well as spatial and temporal fixed effects. The result suggests that upper- and upper-middle-class households, who can afford to live in expensive private housing and own private cars, pay a premium in the housing market for the accessibility benefit brought by the new transit infrastructure. Our findings could contribute to a better understanding of the behaviour of choice riders in the housing market and a more informed policy design for value capture programs.

2015 SSCI Reported Journal Impact Factors and Rank among 344 Economics,
94 Business & Finance, and 39 Urban Studies Journals

Journal Name


Impact Factor

5 Year Impact Factor

Article Influence ® Score


7/344 in Economics



American Economic Review 9/344 in Economics 3.833 5.140 6.929

Journal of Political Economy

12/344 in Economics




Journal of Financial Economics

13/344 in Economics
2/94 in Business & Finance




Review of Environmental Economics and Policy

15/344 in Economics




Review of Financial Studies

20/344 in Economics
4/94 in Business & Finance




Review of Economics and Statistics

21/344 in Economics




Journal of Environmental Economics and Management

39/344 in Economics




World Development

29/344 in Economics




Economic Journal

31/344 in Economics




Journal of Policy Analysis and Management

34/344 in Economics




Brookings Papers on Economic Activity

38/344 in Economics




Journal of Urban Economics

42/344 in Economics
3/39 in Urban Studies




Journal of Economic Growth

43/344 in Economics




Review of Finance

47/344 in Economics
14/94 in Business & Finance





5/39 in Urban Studies




Urban Studies

8/39 in Urban Studies




Journal of Development Economics

59/344 in Economics




Journal of Financial Markets

19/94 in Business & Finance




Journal of Economic Psychology

68/344 in Economics




Environment and Planning C: Government and Policy

46/104 in Environmental Studies
11/47 in Public Administration




Journal of Regional Science

75/344 in Economics




Journal of Financial and Quantitative Analysis

76/344 in Economics
21/94 in Business & Finance




Journal of Public Economics

88/344 in Economics




Journal of Comparative Economics

93/344 in Economics




Journal of Money Credit and Banking

99/344 in Economics
31/94 in Business & Finance




China Economic Review

128/344 in Economics




European Economic Review

131/344 in Economics




Journal of Housing Economics

142/344 in Economics
20/39 in Urban Studies




Regional Science and Urban Economics

145/344 in Economics
21/39 in Urban Studies




Real Estate Economics

166/344 in Economics
55/94 in Business & Finance
29/39 in Urban Studies




Journal of Real Estate Research

208/344 in Economics
66/94 in Business & Finance




Journal of Real Estate Finance and Economics

210/344 in Economics
67/94 in Business & Finance
32/39 in Urban Studies




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