Choosing the optimal holding period is an important part of real estate investment decisions, because “when to sell” affects “whether to buy.” This paper presents a theoretical model for such decision making. Our model indicates that the optimal holding period is affected by both...

This paper provides a formal analysis on a well-known issue of the housing market observable transaction prices are a biased indication of the true market condition if significant numbers of listed properties are delisted without sale. We provide a closed-form formula to identify and correct...

This study examines the heterogeneous appraiser behavior and its implication on the traditional appraisal smoothing theory. We show that the partial adjustment model is consistent with the traditional appraisal smoothing argument (Geltner 1989) only when all the appraisers choose the same...

Thinly-traded private assets do not fit into the traditional finance paradigm of a liquid and well-functioning market where trading is continuous and instantaneous. Since private assets cannot be bought and sold easily, they bear liquidity risk. Classical finance theories cannot properly gauge...

Investment in thinly-traded private assets involves liquidity risk. Existing literature provides limited guidance as it mainly focuses on publicly-traded security assets such as stocks and bonds. This paper develops an analytical tool for quantifying liquidity risk of private assets. Using...

This paper documents women on average pay more for mortgages than men. The disparity cannot be fully explained by traditional variables such as mortgage features, borrower characteristics, and market conditions. While the persistence of gender disparity may suggest discrimination, we offer a...

This paper comments on the Weighted Repeated Sales (WRS) method in Case and Shiller (1989). We find that Case-Shiller's model for step-two of WRS is conceptually mis-specified and empirically inaccurate, which are likely to cause the S&P/Case-Shiller Home Price Indices to be biased for the most...

Modern Portfolio Theory is a single-period model developed for the efficient securities market, in which asset prices are implicitly assumed to follow a random walk. It is widely agreed that real estate does not fit into the efficient market paradigm; however, mixed-asset portfolio analysis...

It is well documented in the literature that long-run asset prices do not follow the random walk, and their returns are not independent and identically-distributed (i.i.d.) over time. But how can this notion – long-run returns and volatilities being horizon dependent - be incorporated into...

This paper identifies a critical issue in the Weighted Repeated Sales (WRS) method – the omission of market risk in the weight estimation model specified by Case and Shiller (1989). It demonstrates that the omission of market risk is conceptually unjustified. Through extensive examination of...