This paper examines why monetary policy can have vastl< different effects on local housing prices across metropolitan statistical areas (MSAs). We focus on the period 1995 to 2008, which includes the period of housing price bubbles in several parts of the U.S. Based on a spatial panel approach we show that MSAs with similar demand conditions, as measured for example by population growth, and similar supply conditions, as measured for example by housing supply elasticities, react similarly to monetary policy at the national level. In a follow-up panel data model we confirm the importance of these MSA-specific characteristics directly through a set of interaction terms between these factors and monetary policy stance and sentiment indicators. It turns out that MSA-specific demand and supply characterisitcs, such as population growth and inelastic housing supply , are the crucial links that transmit national monetary policy and sentiment into housing price inflation at the local level.
This study examines why monetary policy at the national level can have vastly different effects on appreciation rates of single family houses across metropolitan statistical areas (MSAs). The study employs Case/Shiller monthly house price index data for 19 MSAs from 1992:06 to 2014:12 and FHFA quarterly house price index data for 94 MSAs from 1992:3 to 2014:4. We model the importance of MSA-specific demand and supply characteristics through a set of interaction terms between these factors and monetary policy. The empirical analysis is cast in terms of a state-space approach with a stochastic trend component to absorb the impact of omitted variables. Robustness checks use panel data estimators with interaction terms. A lower federal funds rate is associated with home price run-ups in MSAs that are characterized by higher demand and tighter supply conditions.
This article uses regime-switching models of the threshold type to analyze the adjustment process of rental prices for three U.K. commercial real estate sectors over the period 1974-2008. The nonlinear models outperform their linear counterparts in in-sample fit. Their out-of-sample forecasting ability is better whenever the corresponding linear models contain a significant amount of neglected nonlinearity. Regime switches are triggered when the growth rates of rental price exceed certain threshold levels. For the industrial and retail sectors such regime switches occur in situations of strong excess demand, for the office sector they occur when there is strong excess supply.
The main purpose of this paper is to empirically model the influence of macroeconomic and financial variables on the performance of risk capital in the US. We start our investigation using a static long-run equilibrium model. In contrast to previous studies, we analyze the effect of several factors simultaneously within the framework of a vector error correction model (VECM). This allows us to study short- and long-term interactions to overcome the problem of endogeneity, and to discover causal mechanisms. The results show that the value of venture capital investments is positively related to industrial production, the exit channel Nasdaq, and the long-term interest rate. However, the value of venture capital investments is negatively related to the short-term interest rate. According to the short-term dynamics, VEC Granger causality confirms that only industrial production influences venture capital performance, while venture capital returns Granger causes Nasdaq performance.
This article examines whether international investors benefit from adding real estate investment trusts (REITs) to a mixed asset portfolio consisting of global stocks, bonds, hedge funds, and commodities. Previous literature has shown that REITs provide a strong co-movement with direct real estate in the long run. We therefore test the diversification potential of international REITs within the strategic asset allocation. Using the Johansen cointegration technique, we show that there is no long-term co-movement between REITs and the other asset classes in the period from January 1990 to December 2009. Thus, the empirical evidence suggests that REITs improve the diversification potential for active investors and those with a long-term investment horizon by simultaneously generating continuous cash flows.
