Mark A. Sunderman

Estimation of Depreciation for Single-Family Appraisals

Methods for the estimation of depreciation within the cost approach to appraisal of single-family residential property have been the focus of very few empirical studies. The purpose of this study is to generate empirical evidence related to one such method, specifically the age-life method. Within the context of a hedonic price model, functional form of the model and the design of the age variable are chosen so that we can test for alternative paths of depreciation with just one model. The alternative paths can be concave, convex or straight-line. Contrary to the evidence presented in several previous studies, the empirical evidence presented in this paper supports a path of depreciation for single-family houses that is concave (i.e., initially less rapid than straight-line). Of the standard paths of depreciation often suggested, the reverse sum of the years digits path most closely approximates the path indicated as appropriate by this study, particularly in the early years of the life of a house. If appraisers are looking for an approximation of the path of depreciation for single-family residences, it would appear that the reverse sum of the years digits path is much more appropriate than the straight-line path that is often assumed. Copyright American Real Estate and Urban Economics Association.

Using multiple criteria decision analysis (MCDA) to assist in estimating residential housing values

Considerable literature exists regarding the complexity of the residential real estate appraisal process and the methods employed to determine initial listing prices as estimates of intrinsic market prices. Deviations in residential real estate intrinsic values occur due to a multiplicity of attributes and explanatory factors requiring consideration. We conduct a panel study using a Multiple Criteria Decision Analysis (MCDA) based framework that utilizes the skills and knowledge of a panel of residential real estate professionals (i.e. appraisers and realtors). We demonstrate how cognitive mapping and the Measuring Attractiveness by a Categorical Based Evaluation Technique (MACBETH) may assist in estimating appropriate offer/sale prices and strengthening current valuation approaches such as using comparables and/or hedonic modeling. The managerial implications of our MCDA-based framework and some avenues for future research are also presented.

Vertical Inequity in Property Taxation: A Neighborhood Based Analysis

This paper applies a model to test for vertical inequity in property taxes using a set of residential sales from Bloomington, Indiana. The initial purpose is to compare results with those using the presently accepted regression approach as applied by Smith, B. C. (2000). (See Journal of Real Estate Research 19(3), 321–344, to the same data.) The new outcomes demonstrate there can be significant inequity in a jurisdiction that remains hidden under previous testing methods. Also, the new procedure generates multipliers to adjust for identified inequities. Findings imply that tests for value-related inequity in property tax assessment should be conducted using multiple spatial scales.

Valuation of Land Using Regression Analysis

Estimating the market value of vacant land is one of the more difficult tasks of current real estate appraisal. The problem applies equally to the appraisal of a single site or to the mass appraisal of land. Appraisal texts list several methods to use for this purpose. Regardless of the method chosen, however, when land sales are sparse, valuation may be reduced to an educated guess.

A prioritisation index for blight intervention strategies in residential real estate

Abstract The existence of abandoned or poorly maintained properties, often with overgrowth, litter, and abandoned junk – or “neighbourhood blight” as it is sometimes referred to – is a complex and wide-ranging real estate problem. Its detrimental impact on neighbourhood property values, safety and reputation requires an elucidation of where its causes lie, which in turn requires that areas of intervention first be identified. The need is for multidimensional solutions which take into account different stakeholders’ interests and perceptions. To address this need, this paper integrates cognitive mapping and multiple criteria decision analysis (MCDA) and, based on the discussion of real world cases with a panel of urban planning experts from the Lisbon municipality in Portugal, constructs a blight intervention prioritisation index. The resulting framework was validated by the participating panel members and a representative of the city council, and is aimed at facilitating strategies for intervention and elimination of residential neighbourhood blight..

Stock price movement around the merger announcements: insider trading or market anticipation?

Purpose - – The purpose of this paper is to examine the stock price movements for existence of informed trading prior to a merger announcement for the companies listed on the emerging markets of India for the period from 1996 to 2010. Design/methodology/approach - – This study applies several event study methodologies and regression analyses to analyze the stock price movement surrounding a merger announcement. The paper divides mergers in two different types: industry merger cases and non-industry merger cases and in two different time periods: recession and boom. Findings - – The results show that the information held only by insiders’ works its way into prices. The paper finds strong evidence of insider trading in the case of industry mergers and mergers during recessions. Practical implications - – The results from this study have immediate policy implications for India and other developing markets as the paper provides the type of mergers and time periods when merger announcements are more susceptible to insider trading. Originality/value - – The paper extends the literature on mergers and insider trading by analyzing firms trading on a developing capital market, which, unlike the developed markets, is characterized by inadequate disclosure and a weaker enforcement of securities regulations. The results support this notion and recommend Indian securities market regulators to tighten the lax regulations. In addition, the author document the divergence in price reaction to the merger announcements for different types of mergers: industry mergers and non-industry mergers, as well as for mergers during different market conditions: recession vs booming capital markets.

Reits and Market Microstructure: A Comprehensive Analysis of Market Quality

This study analyzes the market quality differences, in terms of liquidity and volatility, between real estate investment trusts (REITs) and non-REIT common stocks. The 2008 financial crisis has significantly influenced the market quality for REITs. Our findings reveal intraday patterns indicating a lower liquidity, higher volatility, and greater price impact for REITs than non-REITs for the pre-crisis period. These relationships reverse during the post-crisis period with REITs becoming more liquid, less volatile, and cheaper to trade than non-REITs. Further, we document that post-crisis trading interest in REITs has increased significantly as reflected by increased volume, number of trades, and number of quotes.

Original‐Issue Systematic and Default Risk Pricing Efficiency of Speculative‐Grade Bonds

We investigate whether primary market, original-issue risk premiums on speculative-grade debt are justified solely by expected defaults or whether these risk premiums also include other orthogonal risk components. Studies of secondary-market holding period risk and return have hypothesized that risk premiums on speculative-grade debt may be explained by bond-and equity-related systematic risk and possibly other types of risk. Using an actuarial approach that considers contemporaneous correlation between default frequency and severity and first-order serial correlation, we cannot reject the hypothesis that the entire original-issue risk premium can be explained by expected default losses. This suggests that speculative-grade bond primary markets efficiently price default risk and that other types of risk are priced as coincident as opposed to orthogonal risks.

Hospitality REITs and financial crisis: a comprehensive assessment of market quality

Purpose The purpose of this paper is to examine market microstructure differences in stock market quality for hospitality real estate investment trusts (REITs) during the pre- and post-financial crisis eras. It provides insight on different trading strategies based on the underlying liquidity and volatility of hospitality REITs as compared traditional REITs and the broader market. Design/methodology/approach The paper uses established microstructure measures for liquidity, trading volumes and risk assessment and compares daily and intraday trading patterns of REITs, hospitality REITs and the broad market. Findings The results suggest a quicker recovery of performance for hospitality REITs and some fundamental increases in liquidity measures post-crisis. The results of the study highlight the differences in trading volumes, liquidity and risk profile of hospitality REITs compared to traditional REITs both in the pre- and post-financial crisis periods. Practical implications The quicker recovery of hospitality REITs in key trading measures may suggest flight to quality during periods of high volatility. Originality/value This study fills the gap in the literature relative to microstructure studies and provides information to help hotel firms and portfolio managers choose an appropriate organizational structure and investment vehicle, respectively.

Teaching on information freeway: Building learning communities

This study presents the first empirical analysis of the actual classroom interactions to test the relationship between the instructional design elements and the overall meaningful interactions among Business major students. Eighteen online graduate Business courses, 9 from each of the fall and spring semesters, were analyzed using bivariate and multivariate analysis techniques. Findings suggest that the level of overall meaningful interaction among learners can be improved by dividing the students into smaller groups, using introduction sections, and limiting participation from the instructor. The results of this study can prove to be useful for practitioners, designers and instructors, who are designing, developing or teaching online Business courses.