scholarly journals Loss Aversion and Anchoring in Commercial Real Estate Pricing: Empirical Evidence and Price Index Implications

2011 ◽  
Vol 39 (4) ◽  
pp. 635-670 ◽  
Author(s):  
Sheharyar Bokhari ◽  
David Geltner
Keyword(s):  
Real Estate ◽  
Empirical Evidence ◽  
Loss Aversion ◽  
Price Index ◽  
Commercial Real Estate

Loss Aversion and Market Liquidity in the Real Estate Market

2014 ◽  
Vol 22 (2) ◽  
pp. 223-249
Author(s):  
Sun Young Park
Keyword(s):  
Real Estate ◽  
Loss Aversion ◽  
Real Estate Market ◽  
Commercial Real Estate ◽  
Market Liquidity ◽  
The Real Estate ◽  
The Real Estate Market ◽  
Expectation Hypothesis ◽  
Property Sales ◽  
The Impact

The most commonly observed risk averse behavior in the commercial real estate market is loss aversion on the part of investors; i.e., investors are more sensitive to prospective losses than to prospective gains. This observation leads to the natural question : Does the market rationally anticipate investors' loss aversion? If not, then does loss aversion become stronger in a relatively illiquid market? The answer to these questions provides strategically important implications to institutional investors. We propose to explore the impact of loss aversion on the commercial real estate market by testing two competing hypotheses : (1) the rational market expectation hypothesis and (2) the liquidity spiral hypothesis. The rational market expectation hypothesis holds that the market rationally anticipates investors' behavioral loss aversion. As a result, the interaction between lagged market liquidity and loss aversion does not have an impact on the probability of property sales. On the other hand, the liquidity spiral hypothesis holds that the interaction between market liquidity and loss aversion has an impact on the probability of property sales due to the self-fulfilling feedback effect between loss aversion and market liquidity. In the context of REITs' property transactions, we find partial evidence for the liquidity spiral hypothesis : private market liquidity and stock market liquidity each has an additional impact on the sale probability of property.

Cognitive bias, intuitive attributes and investment decision quality in commercial real estate in Uganda

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moses Munyami Kinatta ◽  
Twaha Kigongo Kaawaase ◽  
John C. Munene ◽  
Isaac Nkote ◽  
Stephen Korutaro Nkundabanyanga
Keyword(s):  
Real Estate ◽  
Loss Aversion ◽  
Cognitive Bias ◽  
Investment Decision ◽  
Commercial Real Estate ◽  
Decision Quality ◽  
Content Type ◽  
Real Estate Sector ◽  
Confidence Degree ◽  
The Relationship

PurposeThis study examines the relationship between investor cognitive bias, investor intuitive attributes and investment decision quality in commercial real estate in Uganda.Design/methodology/approachA cross-sectional research survey was used in this study, and data were collected from 200 investors of commercial real estate in Uganda using a structured questionnaire. Hierarchical regression analysis was used to test the hypotheses derived under this study.FindingsThe results indicate that investor cognitive bias and investor intuitive attributes are positive and significant determinants of investment decision quality in commercial real estate. In addition, the two components of Investor cognitive bias (framing variation and cognitive heuristics) are positive and significant determinants of investment decision quality, whereas mental accounting is a negative and significant determinant of investment decision quality. For investor intuitive attributes, confidence degree and loss aversion are positive and significant determinants of investment decision quality, whereas herding behavior is a negative and significant determinant of investment decision quality in commercial real estate in Uganda.Practical implicationsFor practitioners in commercial real estate sector should emphasize independent evaluation of investment opportunities (framing variation), simplify information regarding investments (Cognitive heuristics), believe in own abilities (Confidence degree), be risk averse (loss aversion) and avoid making decisions based on subjective visual mind (mental accounting) and group think/herding in order to make quality investment decisions. For policymakers, the study has illuminated factors such as provision of reliable information that ought to be taken into account when promulgating policies for regulation of the commercial real estate sector. This will help investors to come up with investment decisions which are plausible.Originality/valueFew studies have focused on investor cognitive bias and investor intuitive attributes on investment decision quality in commercial real estate. This study is the first to examine the relationship, especially in the commercial real estate sector in a developing country like Uganda.

scholarly journals Commonalities in Private Commercial Real Estate Market Liquidity and Price Index Returns

2021 ◽  
Author(s):  
Dorinth W. van Dijk ◽  
Marc K. Francke
Keyword(s):  
Real Estate ◽  
Capital Markets ◽  
Price Index ◽  
Supply And Demand ◽  
Real Estate Market ◽  
Commercial Real Estate ◽  
Market Liquidity ◽  
Theoretical Simulation ◽  
Operating Income ◽  
The Difference

AbstractWe examine co-movements in private commercial real estate index returns and market liquidity in the US (apartment, office, retail) and for eighteen global cities, using data from Real Capital Analytics over the period 2005–2018. Our measure of market liquidity is based on the difference between supply and demand price indexes. We document for all analyzed markets much stronger commonalities in changes in market liquidity compared to commonalities in real price index returns. We further provide empirical evidence that space markets are less integrated than capital markets by analyzing co-movements in net-operating-income and cap rate spreads (over similar maturity bond yields). In a theoretical simulation model, we show that the strong integration of capital markets compared to space markets, is in fact the reason why market liquidity co-moves so strongly compared to returns. Our results are of interest for large private real estate investors such as pension funds and other institutional investors who are interested in spreading risk. Our findings imply that fully diversified price return benefits may be difficult to obtain, because market liquidity may dry up in all markets simultaneously, which makes portfolio re-balancing more difficult and costly.

scholarly journals Managed Informality: Regulating Street Vendors in Bangkok

2016 ◽  
Vol 15 (1) ◽  
pp. 29-43 ◽  
Author(s):  
Quentin Batréau ◽  
Francois Bonnet
Keyword(s):  
Real Estate ◽  
Empirical Evidence ◽  
Legal System ◽  
Political System ◽  
Commercial Real Estate ◽  
Local Authorities ◽  
Street Vendors ◽  
Street Vending ◽  
The Relationship ◽  
District Administration

The article focuses on the relationship between street vendors and local authorities in Bangkok. We examine the goals, the means, and the effects of everyday regulation of street vending. We document how the district administration produces and maintains informality by creating a parallel set of rules where street vendors enjoy negligible rents and little competition. We provide detailed empirical evidence on earnings, rents, fines, and rules regarding commercial real estate. The district administration's policy of “managed informality” results in a situation where more established informal vendors control less established ones. We hypothesize in the conclusion that the district administration's parallel legal system adjusts to the population's expectations in a political system where the law has little popular support.

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