Youngha Cho

The organizational boundaries of housebuilding firms in Korea

This paper investigates the boundary of activities undertaken by Korean housebuilding firms. First, it examines the contractual relationships between housebuilding firms and contractors, focusing on the existence of quasi‐firm type organization in the Korean housebuilding industry. Second, it looks at how far Korean housebuilding firms diversify into other activities outside the industry. Secondary data analysis and an interview survey, carried out over the period between 1980 and 1995, were used. The results show that Korean housebuilding firms depend on a traditional contractual relationship with contractors but that quasi‐firm type organization is not established. On the other hand, housebuilding firms diversify into both related and unrelated business. This diversification could be a short‐term ‘survival strategy’ under a regulated environment rather than a long‐term ‘growth strategy’.

Does Illiquidity Matter in Residential Properties

ABSTRACT No, it does not, despite the general perception that illiquidity matters in real estate. As expected, our evidence shows that the illiquidity costs for the U.S. residential properties are large. The costs are equivalent to 12% of the total property returns on average, ranging from 9.5% to 29.5% of property prices depending on the illiquidity level and market conditions. However, when amortized by holding periods, monthly illiquidity costs are on average 0.08%, and illiquidity risk does not appear to be priced in residential properties; illiquid properties do not show higher returns than liquid properties. On the contrary, we find evidence of flight-to-quality in bull markets, that is, high-quality illiquid properties are preferred to low-quality liquid properties in buoyant markets. These results are in sharp contrast with those in equities and bonds where flight-to-liquidity has been reported when markets are in stress.

Household Overconfidence in the UK Housing Market

We investigate if house prices are affected by household overconfidence about the imperfect public information they use to predict house prices. We propose a measure for household overconfidence about the public signals they use to predict house prices. Our empirical results show that UK households were overconfident about the signals of consumption regardless of regions. However, households in London were overconfident about the signals of stock markets whereas those remote from London were overconfident about the signals of human capital. Despite the negative effects of household overconfidence on house prices during the early 1990s and the 2008 financial crisis, UK house prices were on average positively affected by their overconfidence, in particular, 0.5% per quarter in London for our sample period from 1980 to 2018.