The wealth effect of housing on aggregate consumption

This study Measures the effect of changes in net housing and financial wealth oil household consumption using Australian data over the period Q2:1988-Q1:2003. It is found a permanent one dollar rise in housing wealth leads to a six cent increase in consumption, three times the effect of financial wealth. The result speaks strongly against the notion of assets fungibility.. and Suggests that a sharp movement in house prices is potentially more disruptive than a corresponding movement ill financial asset prices.

Editorial

The year so far has been a slow start for many businesses, but at least we have not seen the collapse of as many businesses that we were seeing around two years ago. We are, however, still well and truly in the midst of a global recession. Interest rates are still at an all time low, UK house prices seem to be showing little signs of increase (except in London where everyone still seems to want to live!) and for the ardent shopper there are bargains to be had everywhere. It seems strange that prices on the high street do not seem to have increased in over ten years. Mobile phones, DVD players even furniture seems to be cheaper than they used to be. Whist much of this is down to cheaper manufacturing and the rest could probably be explained by competition within the market place. Does this mean that quality suffered too? Now that we live in a world when if a television is not working it is thrown away and replaced. There was a time when you would take it to some odd looking man that your father would know who could fix it for you. (I remember our local television fix-it man, with his thick rimmed bifocal spectacles and a poor comb-over; he had cardboard boxes full of resistors and electrical wires on the floor of his front room that smelt of soldering irons!) Is this consumerism at an extreme or has this move to disposability made us a better society? Before you think these are just ramblings there is a point to this. According to latest global figures of contact lens sales the vast majority of contact lenses fitted around the world are daily, fortnightly or monthly disposable hydrogel lenses. Certainly in the UK over 90% of lenses are disposable (with daily disposables being the most popular, having a market share of over 50%). This begs the question – is this a good thing? Maybe more importantly, do our patients benefit? I think it is worth reminding ourselves why we went down the disposability route with contact lenses in the first place, and unlike electrical goods it was not just so we did not have to take them for repair! There are the obvious advantages of overcoming problems of breakage and tearing of lenses and the lens deterioration with age. The lenses are less likely to be contaminated and the disinfection is either easier or not required at all (in the case of daily disposable lenses). Probably the landmark paper in the field was the work more commonly known as the ‘Gothenburg Study’. The paper, entitled ‘Strategies for minimizing the Ocular Effects of Extended Contact Lens Wear’ published in the American Journal of Optometry in 1987 (volume 64, pages 781-789) by Holden, B.A., Swarbrick, H.A., Sweeney, D.F., Ho, A., Efron, N., Vannas, A., Nilsson, K.T. They suggested that contact lens induced ocular effects were minimised by: •More frequently removed contact lenses •More regularly replaced contact lenses •A lens that was more mobile on the eye (to allow better removal of debris) •Better flow of oxygen through the lens All of these issues seem to be solved with disposability, except the oxygen issue which has been solved with the advent of silicone hydrogel materials. Newer issues have arisen and most can be solved in practice by the eye care practitioner. The emphasis now seems to be on making lenses more comfortable. The problems of contact lens related dry eyes symptoms seem to be ever present and maybe this would explain why in the UK we have a pretty constant contact lens wearing population of just over three million but every year we have over a million dropouts! That means we must be attracting a million new wearers every year (well done to the marketing departments!) but we are also losing a million wearers every year. We certainly are not losing them all to the refractive surgery clinics. We know that almost anyone can now wear a contact lens and we know that some lenses will solve problems of sharper vision, some will aid comfort, and some will be useful for patients with dry eyes. So if we still have so many dropouts then we must be doing something wrong! I think the take home message has to be ‘must try harder’! I must end with an apology for two errors in my editorial of issue 1 earlier this year. Firstly there was a typo in the first sentence; I meant to state that it was 40 years not 30 years since the first commercial soft lens was available in the UK. The second error was one that I was unaware of until colleagues Geoff Wilson (Birmingham, UK) and Tim Bowden (London, UK) wrote to me to explain that soft lenses were actually available in the UK before 1971 (please see their ‘Letters to the Editor’ in this issue). I am grateful to both of them for correcting the mistake.

Essays on Machine Learning and Hedonic Models

Thesis (Ph.D.)--University of Washington, 2016-08

Essays in asset price bubbles

This thesis studies the field of asset price bubbles. It is comprised of three independent chapters. Each of these chapters either directly or indirectly analyse the existence or implications of asset price bubbles. The type of bubbles assumed in each of these chapters is consistent with rational expectations. Thus, the kind of price bubbles investigated here are known as rational bubbles in the literature. The following describes the three chapters. Chapter 1: This chapter attempts to explain the recent US housing price bubble by developing a heterogeneous agent endowment economy asset pricing model with risky housing, endogenous collateral and defaults. Investment in housing is subject to an idiosyncratic risk and some mortgages are defaulted in equilibrium. We analytically derive the leverage or the endogenous loan to value ratio. This variable comes from a limited participation constraint in a one period mortgage contract with monitoring costs. Our results show that low values of housing investment risk produces a credit easing effect encouraging excess leverage and generates credit driven rational price bubbles in the housing good. Conversely, high values of housing investment risk produces a credit crunch characterized by tight borrowing constraints, low leverage and low house prices. Furthermore, the leverage ratio was found to be procyclical and the rate of defaults countercyclical consistent with empirical evidence. Chapter 2: It is widely believed that financial assets have considerable persistence and are susceptible to bubbles. However, identification of this persistence and potential bubbles is not straightforward. This chapter tests for price bubbles in the United States housing market accounting for long memory and structural breaks. The intuition is that the presence of long memory negates price bubbles while the presence of breaks could artificially induce bubble behaviour. Hence, we use procedures namely semi-parametric Whittle and parametric ARFIMA procedures that are consistent for a variety of residual biases to estimate the value of the long memory parameter, d, of the log rent-price ratio. We find that the semi-parametric estimation procedures robust to non-normality and heteroskedasticity errors found far more bubble regions than parametric ones. A structural break was identified in the mean and trend of all the series which when accounted for removed bubble behaviour in a number of regions. Importantly, the United States housing market showed evidence for rational bubbles at both the aggregate and regional levels. In the third and final chapter, we attempt to answer the following question: To what extend should individuals participate in the stock market and hold risky assets over their lifecycle? We answer this question by employing a lifecycle consumption-portfolio choice model with housing, labour income and time varying predictable returns where the agents are constrained in the level of their borrowing. We first analytically characterize and then numerically solve for the optimal asset allocation on the risky asset comparing the return predictability case with that of IID returns. We successfully resolve the puzzles and find equity holding and participation rates close to the data. We also find that return predictability substantially alter both the level of risky portfolio allocation and the rate of stock market participation. High factor (dividend-price ratio) realization and high persistence of factor process indicative of stock market bubbles raise the amount of wealth invested in risky assets and the level of stock market participation, respectively. Conversely, rare disasters were found to bring down these rates, the change being severe for investors in the later years of the life-cycle. Furthermore, investors following time varying returns (return predictability) hedged background risks significantly better than the IID ones.

Are property prices non-linear? An investigation of the behaviour of US REITs and UK property company shares

Linear models of market performance may be misspecified if the market is subdivided into distinct regimes exhibiting different behaviour. Price movements in the US Real Estate Investment Trusts and UK Property Companies Markets are explored using a Threshold Autoregressive (TAR) model with regimes defined by the real rate of interest. In both US and UK markets, distinctive behaviour emerges, with the TAR model offering better predictive power than a more conventional linear autoregressive model. The research points to the possibility of developing trading rules to exploit the systematically different behaviour across regimes.

House price dynamics and bank herding: European empirical evidence

This paper investigates the behavior of residential property and examines the linkages between house price dynamics and bank herding behavior. The analysis presents evidence that irrational behaviour may have played a significant role in several countries, including; United Kingdom, Spain, Denmark, Sweden and Ireland. In addition, we also provide evidence indicative of herding behaviour in the European residential mortgage loan market. Granger Causality tests indicate that non-fundamentally justified prices dynamics contributed to herding by lenders and that this behaviour was a response by the banks as a group to common information on residential property assets. In contrast, in Germany, Portugal and Austria, residential property prices were largely explained by fundamentals. Furthermore, these countries show no evidence of either irrational price bubbles or herd behaviour in the mortgage market. Granger Causality tests indicate that both variables are independent.

Prices, property and markets in water allocation

Includes bibliography

Which School Attributes Matter? The Influence of School District Performance and Demographic Composition on Property Values

Increasing levels of segregation in American schools raises the question: do home buyers pay for test scores or demographic composition? This paper uses Connecticut panel data spanning eleven years from 1994 to 2004 to ascertain the relationship between property values and explanatory variables that include school district performance and demographic attributes, such as racial and ethnic composition of the student body. Town and census tract fixed effects are included to control for neighborhood unobservables. The effect of changes in school district attributes is also examined over a decade long time frame in order to focus on the effect of long run changes, which are more likely to be capitalized into prices. The study finds strong evidence that increases in percent Hispanic has a negative effect on housing prices in Connecticut, but mixed evidence concerning the impact of test scores on property values. Evidence is also found to suggest that student test scores have increased in importance for explaining housing prices in recent years while the importance of percent Hispanic has declined. Finally, the study finds that estimates of property tax capitalization increase substantially when the analysis focuses on long run changes.

Factors that increase prices and reduce availability of grocery products in European commissaries : report of the Morale, Welfare, and Recreation Panel of the Readiness Subcommittee of the Committee on Armed Services, House of Representatives, Ninety-eighth Congress, second session.

Mode of access: Internet.

Treatment of abandoned deposits and property in failed depository institutions : hearing before the Subcommittee on Financial Institutions Supervision, Regulation and Insurance of the Committee on Banking, Finance, and Urban Affairs, House of Representatives, One Hundred Second Congress, second session, September 24, 1992.

"Serial no. 102-148."

Terminating the Office of Alien Property [microform] : hearing and markup before the Committee on Foreign Affairs and its Subcommittee on International Economic Policy and Trade, House of Representatives, Ninety-sixth Congress, second session, July 31 and September 24, 1980.

CIS Microfiche Accession Numbers: CIS 81 H381-18

The propriety of allowing a qualified exportation of wool discussed historically. To which is added an appendix: containing a table, which shews the value of the woolen goods of every kind, that were entered for exportation at the custom-house, from 1697 to 1780 inclusive, as well as the prices of wool in England, during all that period.

Mode of access: Internet.

Museum Calonnianum : specification of the various articles which compose the magnificent museum of natural history collected by M. de Calonne in France and lately his property : consisting of an assemblage of the most beautiful and rare subjects in entomology, conchology, ornithology, mineralogy, &c. ... all of which are now exhibiting at Saville House ... previous to the sale thereof.

Reads at end: End of the first part.