Matthew I. Spiegel

A Spatial Model of Housing Returns and Neighborhood Substitutability

This article provides a method for estimating housing indices at the local level. It develops a ““distance-weighted repeat-sales”” procedure to exploit the factor structure of the error-covariance matrix in the repeat-sales model. A distance function defined in characteristic and geographical space provides weights for the generalized least-squares model, and allows the use of all of the repeated sales in a metropolitan area to measure returns for the specific neighborhood of interest. We use distance-weighted repeat sales to estimate return indices for all zip codes in the San Francisco Bay area over the period 1980--1994.When distance is defined in terms of socioeconomic characteristics, we find that median household income is the salient variable explaining covariance of neighborhood housing returns. Racial composition and educational attainment, while significant, are much less influential. Zip-code level indices often deviate dramatically from the citywide index, depending upon income levels. This has implications for investors and lenders. Our results indicate that rates of return may vary considerably within a metropolitan area. Thus, simply using broad metropolitan area indices as a proxy for capital appreciation within a specific neighborhood may not be justified.

Non-temporal Components of Residential Real Estate Appreciation

This paper separates the components of capital appreciation returns in an asset market into fixed and stochastic portions. It proposes a control for the problem of fixed components in the capital appreciation return used in transactions-based return estimates. We find a consistent bias in the index resulting from repeat sales regressions which may be eliminated through simple methods. The sign and magnitude of the bias, as well as its systematic variation across property, suggest that it is caused by incremental home improvements, as well as by price risk. We propose a maximum likelihood method for estimating the first and second moments of the fixed and temporal components of real estate returns that relies upon relatively small samples. Copyright 1995 by MIT Press.

Toehold Strategies, Takeover Laws And Rival Bidders

A laminated multi-layer wiring board comprising alternate layers of a glass ceramic material and conductor pattern. The glass ceramic layers are made of a glass ceramic comprising glass and dispersed ceramic particles. The glass ceramic layers further contain hollow or porous silica glass spheres dispersed in the glass ceramic. The hollow or porous silica glass spheres are covered with a ceramic coating layer containing aluminum as a constituent element. Such a structure prevents crystallization of the silica spheres and the resultant rapid increase in the thermal expansion coefficient of the glass ceramic layer. The structure also procludes the formation of pores in the surfaces of the spheres.

Private value components, and the winner's curse in an art index

Abstract Does the private value component of art induce buyers to overpay for paintings? We model this as a type of ‘winners curse’. Private values imply that prices depend upon the potential number of bidders, a number which declines immediately following a sale. A modified repeat sales regression allows for both temporal and private value returns to painting investments. The temporal component represents the evolving capital appreciation of a painting through time. The private value component originates from changes in the maximum private valuation through time. Preliminary results of this return decomposition indicate that the private value return may be significant and positive. The paper explores the further implications of a private value return, including its possible biassing effect upon the capital appreciation index resulting from the repeat sales regression.

Dynamic Competition, Innovation and Strategic Financing

This paper models the interactions among product market innovation, product market competition, and corporate financing decisions in the context of a dynamic duopoly. One competitor faces an opportunity to adopt a new technology. If adopted, the firm must also determine whether it will obtain public or private financing. Our results allow us to relate current firm and industry characteristics to these decision variables. In particular, larger, more profitable firms with small rivals have the greatest incentive to innovate. The private versus public financing decision depends mainly on the magnitude of the technological improvement and length of the period during which private financing extends the innovators product market advantage. Due to the models formulation it is both tractable and amenable to empirical estimation. We estimate the model and provide estimates of the value of innovation and private financing for a sample of industries and firms.

Do Cities and Suburbs Cluster

This article addresses the issue of how closely the fortunes of suburbs are tied to the fortunes of the central city. We develop housing price indices for most of the zip codes in California and use them in a clustering procedure to determine whether city and suburban housing markets naturally aggregate or move separately. We find that central cities tend to group with their suburbs, suggesting that the housing markets of cities and suburbs are closely linked.

A theory of predictable excess returns in real estate

A principal-agent model is employed to characterize the equilibrium mortgage contract. The value of a house depends on the actions of its owner but affects the wealth of both the owner and the lender who writes the mortgage contract with which the house is purchased. Because of this, the buyer is exposed to moral hazard. In some situations, this can lead to inefficient maintenance and predictable excess returns to home ownership. Even though there are potential buyers willing to pay back more money, the bank will not write loans for these consumers because of the adverse incentive effects of such an action.

Identifying an IPO's Impact on Rival Firms

We use the IPO setting to demonstrate how the forecasts generated by a dynamic oligopoly model can help researchers overcome empirical challenges associated with establishing causality and identify appropriate control firms. Both of these are common issues in the empirical corporate finance literature. Recent papers report deteriorating performance by rivals following an IPO in the industry. Authors have attributed this to the competitive advantages a firm acquires by going public. When we reexamine this issue via a dynamic structural model, the results indicate that the value reductions across the industry primarily arise from an increased commoditization of the product market post-IPO. Based on the structural model, the paper develops a new causality test analogous to the difference-in-differences methodology and concludes that IPOs forecast future industry changes but do not cause them.

Dynamic Corporate Capital Stocks: Cross-sectional and Inter-temporal Stock Return Patterns

We investigate a general multiple security equilibrium model in which firms adjust their capital stock in response to economic shocks. Asset values are determined by competitive risk-averse investors. When corporate capital increases in value, firms react by creating more of it. This leads to additional risk that must be borne by investors. Overall, the model generates a VAR(1) structure for the state variables determining the cross-section of expected returns, and is broadly consistent with stylized facts (e.g., the value premium, size premium, earnings momentum, and investment premium). In addition, the paper tests a new prediction of the model and finds support for it in the data.