Algorithm of real estate mass appraisal with inequality restricted least squares (IRLS) estimation

2020 ◽  
Vol 13 (2) ◽  
pp. 161-179
Author(s):  
Mariusz Doszyń
Keyword(s):  
Real Estate ◽  
Least Squares ◽  
Econometric Model ◽  
A Priori ◽  
Ordinary Least Squares ◽  
Real Estate Market ◽  
Negative Consequences ◽  
Content Type ◽  
Low Efficiency ◽  
The Impact

Purpose The purpose of this paper is to present an algorithm of real estate mass appraisal in which the impact of attributes (real estate features) is estimated by inequality restricted least squares (IRLS) model. Design/methodology/approach This paper presents the algorithm of real estate mass appraisal, which was also presented in the form of an econometric model. Vital problem related to econometric models of mass appraisal is multicollinearity. In this paper, a priori knowledge about parameters is used by imposing restrictions in the form of inequalities. IRLS model is therefore used to limit negative consequences of multicollinearity. In ordinary least squares (OLS) models, estimator variances might be inflated by multicollinearity, which could lead to wrong signs of estimates. In IRLS models, estimators efficiency is higher (estimator variances are lower), which could result in better appraisals. Findings The final effect of the analysis is a vector of the impact of real estate attributes on their value in the mass appraisal algorithm. After making expert corrections, the algorithm was used to evaluate 318 properties from the test set. Valuation errors were also discussed. Originality/value Restrictions in the form of inequalities were imposed on the parameters of the econometric model, ensuring the non-negativity and monotonicity of real estate attribute impact. In case of real estate, variables are usually correlated. OLS estimators are then inflated and inefficient. Imposing restrictions in form of inequalities could improve results because IRLS estimators are more efficient. In the case of results inconsistent with theoretical assumptions, the real estate mass appraisal algorithm enables having the obtained results adjusted by an expert. This can be important for low quality databases, which is often the case in underdeveloped real estate markets. Another reason for expert correction may be the low efficiency of a given real estate market.

scholarly journals Cap rates and risk: a spatial analysis of commercial real estate

2018 ◽  
Vol 35 (1) ◽  
pp. 25-43
Author(s):  
Florian Unbehaun ◽  
Franz Fuerst
Keyword(s):  
Real Estate ◽  
Risk Perceptions ◽  
Large Scale ◽  
Risk Premia ◽  
Real Estate Market ◽  
Commercial Real Estate ◽  
Data Series ◽  
Large Set ◽  
Content Type ◽  
The Impact

Purpose This study aims to assess the impact of location on capitalization rates and risk premia. Design/methodology/approach Using a transaction-based data series for the five largest office markets in Germany from 2005 to 2015, regression analysis is performed to account for a large set of asset-level drivers such as location, age and size and time-varying macro-level drivers. Findings Location is found to be a key determinant of cap rates and risk premia. CBD locations are found to attract lower cap rates and lower risk premia in three of the five largest markets in Germany. Interestingly, this effect is not found in the non-CBD locations of these markets, suggesting that the lower perceived risk associated with these large markets is restricted to a relatively small area within these markets that are reputed to be safe investments. Research limitations/implications The findings imply that investors view properties in peripheral urban locations as imperfect substitutes for CBD properties. Further analysis also shows that these risk premia are not uniformly applied across real estate asset types. The CBD risk effect is particularly pronounced for office and retail assets, apparently considered “prime” investments within the central locations. Originality/value This is one of the first empirical studies of the risk implications of peripheral commercial real estate locations. It is also one of the first large-scale cap rate analyses of the German commercial real estate market. The results demonstrate that risk perceptions of investors have a distinct spatial dimension.

scholarly journals Revisiting currency swaps: hedging real estate investments in global city markets

2018 ◽  
Vol 36 (2) ◽  
pp. 191-209
Author(s):  
Philipp Bejol ◽  
Nicola Livingstone
Keyword(s):  
Real Estate ◽  
Foreign Currency ◽  
Risk Mitigation ◽  
Sampling Technique ◽  
Real Estate Market ◽  
Small Scale ◽  
Negative Consequences ◽  
Content Type ◽  
Net Worth ◽  
Individual Asset

Purpose The purpose of this paper is to re-examine currency swaps as an effective hedging technique for individual asset performance in today’s global real estate market, by considering hypothetical prime office investments across six different cities and five currency pairs. The perspective of a risk-averse, high net worth, non-institutional, smaller-scale Swiss investor is paired with investors from five additional national markets. Design/methodology/approach The study examines currency swaps in key office markets across three continents (Frankfurt, London, New York, Sydney, Warsaw and Zurich) and extends previous work on the topic by adopting both Monte Carlo (MC) and Latin Hypercube (LH) techniques to create stochastic samples for individual asset performance analyses. This is the first paper to apply LH sampling to currency swaps with underlying real estate assets, and the validity of this method is compared with that of MC. Four models are presented: the experience of the domestic investor (no exchange rate (ER) fluctuations); an unhedged direct foreign investment; hedging rental income and initial purchase price via a currency swap; and hedging rental income and anticipated terminal value. Findings The efficacy of a swap depends on the historical framework of the ERs. If the foreign currency depreciates against the domestic one, hedging the repatriated cash flow of a property investment proved superior to the unhedged strategy (EUR, GBP, PLN and USD to the CHF). An investor would benefit from exposure to an appreciating foreign currency (CHF to the EUR, GBP, PLN and USD), with an unhedged strategy clearly outperforming the currency swap as well as the domestic investor’s performance, while a historically sideways fluctuating ER (AUD to the CHF) also favours an unhedged approach. In all scenarios, unexpected economic or market shocks could cause negative consequences on the repatriated proceeds. Practical implications This research is of interest to small-scale, non-institutional investors aiming to develop strategies for currency risk mitigation in international investments for individual assets; however, tax-optimising strategies and the implications on a larger portfolio have not been taken into account. Originality/value There is no recent academic work on the efficacy of currency swaps in today’s global office market, nor has the position of smaller-scale high net worth investors received much academic attention. This research revisits the discussion on their validity, providing contemporary insight into the performance of six markets using LH as an alternative and original sampling technique.

The impact of gender inequality in education and employment on economic performance in Turkey: evidence from a cointegration approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ömer Esen ◽  
Gamze Yıldız Seren
Keyword(s):  
Least Squares ◽  
Economic Performance ◽  
Ordinary Least Squares ◽  
Estimation Methods ◽  
Content Type ◽  
Cointegration Tests ◽  
Johansen Cointegration ◽  
Education And Employment ◽  
The Impact

PurposeThis study aims to empirically examine the impact of gender-based inequalities in both education and employment on economic performance using the dataset of Turkey for the period 1975–2018.Design/methodology/approachThis study employs Johansen cointegration tests to analyze the existence of a long-term relation among variables. Furthermore, dynamic ordinary least squares (DOLS) and fully modified ordinary least squares (FMOLS) estimation methods are performed to determine the long-run coefficients.FindingsThe findings from the Johansen cointegration analysis confirm that there is a long-term cointegration relation between variables. Moreover, DOLS and FMOLS results reveal that improvements in gender equality in both education and employment have a strong and significant impact on real gross domestic product (GDP) per capita in the long term.Originality/valueThe authors expect that this study will make remarkable contributions to the future academic studies and policy implementation, as it examines the relation among the variables by including the school life expectancy from primary to tertiary based on the gender parity index (GPI), the gross enrollment ratio from primary to tertiary based on GPI and the ratio of female to male labor force participation (FMLFP) rate.

Foreign investment in Australian residential properties

2019 ◽  
Vol 12 (2) ◽  
pp. 166-180 ◽  
Author(s):  
Hassan F. Gholipour ◽  
Hooi Hooi Lean ◽  
Reza Tajaddini ◽  
Anh Khoi Pham
Keyword(s):  
Real Estate ◽  
Foreign Investment ◽  
House Prices ◽  
Real Estate Market ◽  
Housing Development ◽  
Housing Construction ◽  
Annual Data ◽  
Content Type ◽  
Residential Properties ◽  
The Impact

Purpose The purpose of this study is to examine the impact that foreign investment in existing houses and new housing development has on residential house prices and the growth of the housing construction sector. Design/methodology/approach The analysis is based on a panel cointegration method, estimated using annual data for all Australian states and territories spanning the period of 1990-2013. Findings The results indicate that increases in foreign investment in existing houses do not significantly lead to increases in house prices. On the other hand, a 10 per cent increase in foreign investment for housing development decreases house prices by 1.95 per cent. We also find that foreign real estate investments have a positive impact on housing construction activities in the long run. Originality/value Existing studies used aggregate foreign real estate investment in their analyses. As foreign investment in existing houses and foreign investment for housing development have different impacts on the demand and supply sides of housing market, it is crucial that the analysis of the effects of foreign investment in residential properties on real estate market is conducted for each type differently.

scholarly journals The human capital–economic growth nexus in SSA countries: what can strengthen the relationship?

2020 ◽  
Vol 47 (9) ◽  
pp. 1143-1159
Author(s):  
Roseline Tapuwa Karambakuwa ◽  
Ronney Ncwadi ◽  
Andrew Phiri
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Least Squares ◽  
Ordinary Least Squares ◽  
African Countries ◽  
Content Type ◽  
Econometric Approach ◽  
The Impact ◽  
The Relationship ◽  
Ssa Countries

PurposeThe purpose of this study is to examine the impact of human capital on economic growth for a selected sample of nine SSA countries between 1980 and 2014 using a panel econometric approach.Design/methodology/approachThe authors estimate a log-linearized endogenous using the fully modified ordinary least squares (FMOLS) and the dynamic ordinary least squares (POLS) applied to our panel data time series.FindingsThe empirical analysis shows an insignificant effect of human capital on economic growth for our selected sample. These findings remain unchanged even after adding interactive terms to human capital, which are representatives of government spending as well as foreign direct investment. Nevertheless, the authors establish a positive and significant effect of the interactive term between urbanization and human capital on economic growth.Practical implicationsThe results emphasize the need for African policymakers to develop urbanized, “smart”, technologically driven cities within the SSA region as a platform toward strengthening the impact of human capital-economic growth relationship.Originality/valueThis study becomes the first in the literature to validate the human capital–urbanization–growth relationship for African countries.

Mandatory CSR expenditure and stock return

2020 ◽  
Vol 28 (6) ◽  
pp. 951-975
Author(s):  
Asit Bhattacharyya ◽  
Md Lutfur Rahman
Keyword(s):  
Least Squares ◽  
Stock Returns ◽  
Least Squares Method ◽  
Negative Impact ◽  
Generalized Method Of Moments ◽  
Ordinary Least Squares ◽  
Reverse Causality ◽  
Endogeneity Bias ◽  
Content Type ◽  
The Impact

Purpose India has mandated corporate social responsibility (CSR) expenditure under Section 135 of the Indian Companies Act, 2013 – the first national jurisdiction to do so. The purpose of this paper is to examine the impact of mandated CSR expenditure on firms’ stock returns by using actual CSR spending data, whereas the previous studies mostly focus on voluntary CSR proxied by CSR scores. Design/methodology/approach The authors estimate their baseline regression by using ordinary least squares(OLS) method. Although the baseline regression involving CSR expenditure and stock returns using ordinary least squares method are estimated, endogeneity and reverse causality biases are addressed by using two-stage least squares and generalized method of moments approaches. These approaches contribute mitigating endogeneity bias and biases associated with unobserved heterogeneity and simultaneity. Findings The findings document that mandatory CSR expenditure has a negative impact on firms’ stock returns which supports the “shareholders” expense’ view. This result remain robust after controlling for endogeneity bias and the use of both standard and robust test statistics. The authors however observe that this result holds for the firms with actual CSR expenditure equal to the mandated amount but does not hold for the firms with actual CSR expenditure greater than the mandated amount. Therefore, the authors provide evidence that CSR expenditure’s impact on stock returns depends on whether firms simply comply the regulation or voluntarily chose an amount of CSR expenditure above the mandated amount. Originality/value The primary contribution is to present a valid and robust evidence of negative effect of mandated CSR spending on firms’ stock returns when the mandatory CSR spending rule is already in place. This study contributes by examining the impact of mandated CSR spending on stock during post-implementation period (2015-2017), whereas other studies by Dharampala and Khanna (2018); Kapoor and Dhamija (2017); and Mukherjee et al. (2018) mainly examined the impact of legislation on Indian CSR. The authors use mandated actual CSR expenditure, whereas previous studies mostly focus on voluntary CSR proxied by CSR scores.

Board gender diversity, board compensation and firm performance. Evidence from Jordan

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Taha Almarayeh
Keyword(s):  
Firm Performance ◽  
Financial Performance ◽  
Least Squares ◽  
Gender Diversity ◽  
Ordinary Least Squares ◽  
Content Type ◽  
Firm Financial Performance ◽  
Board Compensation ◽  
Board Gender Diversity ◽  
The Impact

Purpose This study aims to analyze the relationship between board gender diversity, board compensation and firm financial performance in the developing country, Jordan, whose cultural, economic and institutional context is very different from most previously analyzed countries’ context. Design/methodology/approach Ordinary least squares regression was used to examine the association between board gender diversity, board compensation and firm financial performance in a sample of 510 firm-year observations during the years 2009–2018. Generalized least squares estimation method was used to confirm that the results are robust. Findings The author provides new evidence that board gender diversity does not contribute to firm financial performance. The author also detects that there is a positive relationship between board compensation on firm financial performance. Originality/value This paper examines the under-researched relationship between board gender diversity, board compensation and firm financial performance. In so doing, the author tries to provide new insights into this relationship within the developing context, the case of Jordan that has a different environment from that of advanced markets. To the best of the researcher’s knowledge, this is almost certainly the first research to investigate the impact of board gender diversity and board compensation on firm financial performance in the Jordanian market. This manuscript is expected to be used as a reference by the regulators and policymakers – both in Jordan and other countries with a similar institutional, cultural setting – to provide a deep understanding of the impact of board gender diversity and board compensation on the firm performance.

scholarly journals The Influence of Energy Certification on Housing Sales Prices in the Province of Alicante (Spain)

2020 ◽  
Vol 10 (20) ◽  
pp. 7129
Author(s):  
Maria-Francisca Cespedes-Lopez ◽  
Raul-Tomas Mora-Garcia ◽  
V. Raul Perez-Sanchez ◽  
Pablo Marti-Ciriquian
Keyword(s):  
Real Estate ◽  
Ordinary Least Squares ◽  
Real Estate Market ◽  
European Countries ◽  
Least Squares Regression ◽  
The Real Estate ◽  
Real Estate Sector ◽  
Final Sample ◽  
Energy Labelling ◽  
The Impact

This work examines the implementation of energy labelling by the residential real estate sector. First, it considers the interest by real estate sellers in not publishing energy certification information, and then, it quantifies the impact of the housing’s energy certification on the asking price. The results are compared with those obtained from other studies conducted in distinct European countries. The study’s final sample was collected, including information from 52,939 multi-family homes placed on the real estate market in the province of Alicante (Spain). One-way analysis of variance (ANOVA) was used, as well as an ordinary least squares regression model. This study highlights the fact that, in the current market, owners and sellers have no incentive to reveal the energy certification, since this permits them to sell homes with low energy ratings at prices similar to those of more energy efficient homes. In addition, it was found that homes with better energy ratings (letters A and B) are not sold at higher prices than homes with other rating letters, unlike the case of other European countries that were examined.

scholarly journals Bridging the gap between real estate research and professional practice in Nigeria

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tunbosun Biodun Oyedokun ◽  
Rotimi Boluwatife Abidoye ◽  
Solomon Pelumi Akinbogun
Keyword(s):  
Real Estate ◽  
Professional Practice ◽  
Academic Research ◽  
Real Estate Market ◽  
Online Questionnaire ◽  
Content Type ◽  
Research Activities ◽  
Research Findings ◽  
Real Estate Research ◽  
The Impact

PurposeBeyond contributing to literature, research findings are expected to reinforce existing best practices while also serving as a springboard for formulating new and more efficient methods of undertaking economic activities. However, academic research is sometimes divorced from implementation and research findings are not always translated into practice. This study, therefore, assesses the impact of real estate research activities and findings on the practice of real estate surveying and valuation in Nigeria as the largest real estate market in Africa.Design/methodology/approachAn online questionnaire survey was conducted to obtain relevant data from Estate Surveyors and Valuers across the country. The survey questions cover reading of academic papers from the field of real estate and the reasons for doing so; whether they have made any changes to their professional practice based on findings from academic papers; and possible barriers to adoption academic research findings in your practice. Mean score ranking and principal component analysis were employed for data analysis.FindingsOut of a total of 61 participants, only 35 have made a change to their professional practice based on findings from academic papers they have read. “Personal development and enlightenment” ranks first on the list of reasons for reading academic papers among the participants while barriers to the adoption of academic research findings relate mainly to education, dissemination and lack of guidance on how to apply research findings.Practical implicationsThe study demonstrates how findings from real estate research are being applied and identifies possible barriers that must be addressed to improve the level of application and consequently, the value of academic studies.Originality/valueThe study provides evidence on barriers to the adoption of academic research and contributes to the global effort to bridge the gap between academia and practice.

scholarly journals The impact of renewable on-site energy production on property values

2020 ◽  
Vol 13 (3) ◽  
pp. 337-356 ◽  
Author(s):  
Niina Leskinen ◽  
Jussi Vimpari ◽  
Seppo Junnila
Keyword(s):  
Real Estate ◽  
Urban Areas ◽  
Energy Production ◽  
Real Estate Market ◽  
Content Type ◽  
Site Energy ◽  
Influencing Mechanism ◽  
Study Results ◽  
The Impact

Purpose Contrary to the traditional technology project perspective, real estate investors see building-specific renewable energy (on-site energy) investments as part of the property and as something affecting the property’s ability to produce a (net) cash flow. This paper aims to show the value-influencing mechanism of on-site energy production from a professional property investors’ perspective. Design/methodology/approach The value-influencing mechanism is presented with a case study of a prime logistics property located in the Helsinki metropolitan area, Finland. The case study results are compared with the results of a survey answered by over 70 property valuation professionals in the Finnish real estate market. Findings Current valuation practice supports the presented value-creation mechanism based on the capitalisation of the savings generated by a building’s own energy production. Valuation professionals see benefits beyond decreased operating expenses such as enhanced image and better saleability. However, valuers acted more conservatively than expected when transferring these additional benefits to the cash flows of the case property. Practical implications Because the savings in operating expenses can be capitalised into the property value, property investors should consider on-site energy production when the return of on-site energy exceeds the return of the property. This enhances the profitability of on-site energy, especially in urban areas with low initial yields. Originality/value This is the first research paper to open the value-influencing mechanism of on-site energy production from a professional property investors’ perspective in commercial properties and to confirm it from a market study.

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