winners and losers in housing markets this paper is a quantitatively oriented theoretical study into the interaction between housing prices aggregate production and household behaviour over a lifetime we develop a life cycle model of a production economy in which land and capital are used to build residential and commercial structures we find that in an economy where the share of land in the value of structures is large housing prices react more to an exogenous change in expected productivity or the world interest rate causing large redistribution effects between net buyers and net sellers of houses changing the financing constraint however has limited effects on housing prices

selection of energy performance contracting business models a behavioral decision making approach abstract as a market based mechanism which can actively promote energy efficiency energy performance contracting epc is now universally accepted throughout china and has been incorporated into various business models four of these business models are frequently adopted in china the share savings model the guaranteed savings model the energy cost trust model and the finance lease model the choice of a suitable business model has been recognized as one of the most important factors in the effective implementation of epc projects in this paper the selection of epc business models is formulated as a multi criteria decision making mcdm problem when selecting an epc business model it is natural for decision makers dms to express their preferences opinions in linguistic terms given the characteristics of epc projects taking dms psychological behavior into account is of considerable and realistic significance todim an acronym in portuguese of interactive and multicriteria decision making has been verified as an effective behavioral decision making method to address the problem of epc business model selection an extended todim method based on multi granularity linguistic terms and entropy measure is proposed the sensitivity and comparison analyses show that dms psychological behavior can affect the selection order with respect to the given epc business models one case of a real life campus epc project demonstrates that the validity and applicability of the proposed extended todim method for solving the epc business model selection problem

household risk management and optimal mortgage choice the portfolio of the typical american household is quite unlike the diversie ed portfolio of liquid assets discussed in e nance textbooks the major asset in the portfolio is a house a relatively illiquid asset with an uncertain capital value the value of the house generally exceeds the net worth of the household which e nances its homeownership through a mortgage contract to create a leveraged position in residential real estate other e nancial assets and liabilities are typically far less important than the house and its associated mortgage contract the importance of housing in household wealth is illustrated in figure i this e gure plots the fraction of household assets in housing and in equities against the wealth percentile of the household poor households appear at the left of the e gure and wealthy households at the right data come from the 1989 and 1998 survey of consumer finances the e gure shows that middle class american families from roughly the fortieth to the eightieth percentile of the wealth distribution have more than half their assets in the form of housing even after the expansion of equity ownership during the 1990s equities are of negligible importance for these households 1

market based empirical research in accounting a review interpretation and extension a decade and a half of the most concerted and ambitious research effort in accounting history is evaluated here it is the search into the relationship between publicly disclosed accounting information and the consequences of the use of this information by the major group of usersequity investors as such consequences are reflected in characteristics of common stocks traded in major exchanges this research effort known as market based accounting research mbar obtained its impetus from major developments in finance theory during the late 1950s and early 1960s these were the portfolio selection theory and its offspring the capital asset pricing model capm and the concept of informationally efficient capital markets ecm subsequent developments in information economics agency theory and optimal incentive signaling models were quickly incorporated into mbar while the impetus to this line of research came from other disciplines accounting was not only a beneficiary but also to a modest extent a benefactor mbar is relevant to the study of capital market efficiency the capm information economics and regulation this contribution distinguishes mbar from most accounting areas whose contributions to other disciplines are negligible in

estimation risk and stability of optimal portfolio composition abstract the mean variance portfolio models indicate that for optimal investment decisions the true ex ante values of the model parameters should be used instead in practice ex post parameter estimates are used if in the estimation process the probability distribution of estimators is not known there is a problem of estimation risk this paper investigates the impact of estimation risk on the composition of optimal portfolios as the multivariance distribution of the vector of optimal portfolio weights allocated to risky assets is analytically intractable a use of the monte carlo simulation experimental is made this study suggests that the composition of optimal portfolio is relatively more stable when the estimates of model parameters are obtained from longer series of historical observations or the expected portfolio return is low

reducing energy demand a review of issues challenges and approaches most commentators expect improved energy efficiency and reduced energy demand to provide the dominant contribution to tackling global climate change but at the global level the correlation between increased wealth and increased energy consumption is very strong and the impact of policies to reduce energy demand is both limited and contested different academic disciplines approach energy demand reduction in different ways emphasising some mechanisms and neglecting others being more or less optimistic about the potential for reducing energy demand and providing insights that are more or less useful for policymakers this article provides an overview of the main issues and challenges associated with energy demand reduction summarises how this challenge is framed by key academic disciplines indicates how these can provide complementary insights for policymakers and argues that a sociotechnical perspective can provide a deeper understanding of the nature of this challenge and the processes through which it can be achieved the article integrates ideas from the natural sciences economics psychology innovation studies and sociology but does not give equal weight to each it argues that reducing energy demand will prove more difficult than is commonly assumed and current approaches will be insufficient to deliver the transformation required

housing demand during the boom the role of expectations and credit constraints i use a life cycle model of housing demand to infer expectations about house prices and home equity requirements for the housing boom of the 2000s from observed household choices expectations and credit constraints are separately identified from the intensive and extensive margins of housing demand the main results are that 1 expected price growth was close to average long run growth 2 home equity requirements were lax initially but tightened after the bust and 3 subjective uncertainty about future price growth was large given the option to default on mortgage debt greater price uncertainty leads to higher optimal household leverage

the housing market s of san diego this paper uses an assignment model to understand the cross section of house prices within a metro area movers demand for housing is derived from a lifecycle problem with credit market frictions equilibrium house prices adjust to assign houses that dier by quality to movers who dier by age income and wealth to quantify the model we measure distributions of house prices house qualities and mover characteristics from micro data on san diego county during the 2000s boom the main result is that cheaper credit for poor households was a major driver of prices especially at the low end of the market

house prices home equity based borrowing and the u s household leverage crisis us household leverage sharply increased in the years preceding the 2007 eco nomic recession the top panel of figure 1 shows the steady rise in household debt since 1975 which accelerated beginning in 2002 in just five years the household sector doubled its debt balance in comparison the contemporaneous increase in corporate debt was modest the middle panel shows that the increase in household debt from 2002 to 2007 translated into a striking rise in household leverage as mea sured by the debt to income ratio during the same time period corporate leverage declined the dramatic absolute and relative rise in us household leverage from 2002 to 2007 is unprecedented compared to the last 25 years one reason for the rapid expansion in household leverage during this period is that mortgage credit became more easily available to new home buyers mian and sufi 2009 strong house price appreciation from 2002 to 2006 however which may have been fueled by the availability of mortgage credit to a riskier set of new home buyers could also have had an important feedback effect on household lever age through existing homeowners given that 65 percent of us households already owned their primary residence before the acceleration in house prices the feedback from house prices to borrowing may be an important source of the rapid rise in household leverage that preceded the economic downturn our central goals in this study are to estimate how homeowner borrowing responded to the increase in house prices and to identify which homeowners responded most aggressively we examine this home equity based borrowing channel using a dataset consisting of anonymous individual credit files of a national consumer credit bureau agency we follow a random sample of over 74 000 us homeowners who owned their homes as of 1997 at an annual frequency from the end of 1997 until the end of 2008 the bottom panel of figure 1 plots the growth in debt of 1997 homeowners over time and shows that existing homeowners borrow significantly more debt as their house prices appreciate from 2002 to 2006 while the aggregate trend is suggestive

firms fiscal years size and industry abstract most u s corporations choose their fiscal years to coincide with the calendar year we document that the larger the firm the more likely it is to begin its fiscal year in january this finding holds across industries

on the diversification observability and measurement of estimation risk this paper reexamines how risk return relationships are affected by investor uncertainty about the exact parameters of the joint rate of return distribution we attempt to clarify results relating to three central issues first we address the issue of diversification focusing on an apt factor model framework second we discuss the observability of estimation risk and describe research experimental designs that should encompass the existence of estimation risk and reveal it in the data finally we suggest exploiting contemporaneous return observations on high and low information securities to aid in the measurement of return parameters for low information securities

nonstationary expected returns abstract recent evidence reveals significant negative serial correlation in aggregate market wide stock returns we extend this result to relative market adjusted returns demonstrating negative serial correlation in five year returns we then test two competing explanations 1 market mispricing and 2 changing expected returns in an efficient market the tests are conducted using the capital asset pricing model to estimate relative returns the evidence suggests that negative serial correlation in relative returns is due almost entirely to variation in relative risks and therefore expected relative returns through time we document substantial relative risk shifts particularly for extreme performing stocks

predisclosure information firm capitalization and security price behavior around earnings announcements several studies on the relationship between earnings reports and security price behavior provide evidence suggesting that a significant portion of the information revealed through earnings reports is reflected in security prices prior to the report month e g ball and brown 1968 and brown and kennelly 1972 this has been attributed at least partly to the existence of other more timely sources of information which allow market agents to forecast earnings prior to their release the evidence above reflects an average finding across all firms one question of interest is whether there are significant systematic crosssectional differences in the security price reactions to earnings announcements of firms which are associated with specific firm characteristics that lead to differential amounts of predisclosure information this study focuses on firm size capitalization as one such characteristic a firm

risk return and equilibrium a revisit this paper reports the results of tests of the major implications of the two parameter capital asset pricing model the findings indicate that the relationship between stock returns and systematic risk contains important nonlinearities during 1935 82 these nonlinearities cannot be ascribed to previously documented anomalies related to firm size or january seasonality moreover the test results appear to be sensitive to the choice of the proxy for the market portfolio

arrested development theory and evidence of supply side speculation in the housing market this paper incorporates speculation into the standard supply and demand framework used to analyze housing booms and busts speculation reverses the common intuition that elastic housing supply attenuates housing booms housing market frictions make land a more attractive speculative investment than housing as a result undeveloped land both facilitates construction and intensies

the economics of energy service contracts energy service contracting can provide a cost effective route to overcoming barriers to energy efficiency energy service contracts allow the client to reduce operating costs transfer risk and concentrate attention on core activities however the energy services model may only be appropriate for a subset of energy services and energy using organisations a challenge for both business strategy and public policy is to identify those situations in which energy service contracting is most likely to be appropriate and the conditions under which it is most likely to succeed energy service contracting is a form of outsourcing it will only be chosen where the expected reduction in the production cost of supplying energy services can more than offset the transaction cost of negotiating and managing the relationship with the energy service provider production costs will be determined by a combination of the physical characteristics of the energy system and the technical efficiency of the relevant organisational arrangements including economies of scale and specialisation transaction costs in turn will be determined by the complexity of the energy service the specificity of the investments made by the contractor the competitiveness of the energy services market and the relevant legal financial and regulatory rules this paper develops these ideas into a general framework that may be used to assess the feasibility of energy service contracting in different circumstances the framework leads to a number of hypotheses that are suitable for empirical test

the turn of the year in canada a number of investigators have reported that january stock returns in the u s exceed returns for other months of the year this paper documents a similar finding for canadian stocks over the period 1951 1980 however canada did not introduce a capital gains tax until 1973 and the paper reports that january returns in canada exceed returns for other months of the year before and after this date thus these data do not support the tax loss selling pressure hypothesis as the entire explanation for the turnof the year effect in stock returns nor by implication do they support the tax lossselling pressure hypothesis as the complete explanation for the small firm effect in u s stocks returns recently keim 9 has reported that returns on nyse and ase firms with small market values exceed by significant margins returns on firms with large market values this result was previously reported by banz 1 and reinganum 11 but keim s analysis shows that most of the excess return for small firms is concentrated in january indeed it is concentrated in the first two weeks in january roll 13 also documents this phenomenon and investigates a number of possible explanations for it 2 after rejecting several possible nonexploitable explanations roll is left with year end tax loss selling pressure of the sort discussed by branch 2 dyl 5 and givoly and ovadia 6 as the most likely explanation of this result according to the tax loss selling pressure hypothesis toward the end of the year stockholders sell stocks that have declined in price during the year investors do this to take advantage of the opportunity to write off capital losses against ordinary income in computing their federal income taxes the year end sell off exerts downward pressure on stock prices as soon as the tax and calendar year ends the selling pressure is relieved and stock prices quickly rebound to their equilibrium levels roll 13 presents some evidence consistent with this hypothesis specifically he finds a negative correlation between stock returns in january and returns over the previous 12 months that is stocks that decrease in value during the year tend to be big gainers in january roll also finds that

towards sustainability of energy systems a primer on how to apply the concept of energy services to identify necessary trends and policies virtually all goods and services that characterize modern societies welfare depend on the provision of commercial energy the core objective of this paper is to identify necessary changes in trends for achieving a transition towards more sustainable energy systems and development paths the major conclusions of this analysis are i a rigorous rethinking process has to take place to identify which level of energy services per capita lead to enhancing human welfare and quality of life ii a significant increase in energy conversion efficiency has to be triggered to finally provide energy services with far less input of energy than today iii a continuous increase in the share of renewable energy sources and other low emission options has to be brought about iv however as history has shown this process of technological learning has to be accompanied by proper energy price and regulatory policies otherwise it is very likely that energy conservation gains due to technical efficiency improvements will be outweighed again by increases in energy service demand and straightforward energy consumption and co 2 emissions

turning green into gold a framework for energy performance contracting epc in china s real estate industry abstract there is a growing interest in a sustainable built environment and green technologies are gaining worldwide attention however implementing green technologies usually requires more investment than using traditional technologies and the payback period tends to be very long in china most developers sell their properties and subsequently transfer the ownership to customers hence a crucial problem for promoting green construction is that developers cannot obtain economic profits gold from implementing green technologies meanwhile other stakeholders such as property management companies are also hesitant to adopt green technologies because of the large investment involved and their lack of experience to tackle this problem an energy performance contracting epc based framework is proposed to turn green investment into gold benefit by careful sharing of the risks existed the framework was developed by conducting a focus group meeting with three experienced representatives from developer property management company and energy service company respectively a real life case study which includes both energy efficient system retrofit and new construction is used to estimate the costs and benefits involved to demonstrate and verify the conceptual framework the results show that the proposed framework can support the application of green technologies in both types of projects economic benefits as well as environmental benefits can be gained for the project stakeholders and the whole society

crossovers dividends and the size effect the size effect may have been the result of high stock volatility and low dividend payments suppose an equity market is partitioned into a large stock index and a small stock index and suppose that over a given period of time each of the indexes retains its share of the total market capitalization price volatility will cause some stocks to cross over from one index to the other which will result in higher returns for the small stock index and lower returns for the large stock index dividend payments by large companies could offset the effect of the crossovers but they have historically been insufficient to do so hence the size effect

profiting from negawatts reducing absolute consumption and emissions through a performance based energy economy abstract current energy and ghg emissions policies either focus directly on emissions or promote renewable production and the implementation of specific efficiency measures meanwhile the fundamental structure of the energy market based on profits through energy throughput remains largely unchallenged this policy oversight prevents the transition to an energy economy in which profits are based on energy services delivered at the lowest energy cost a performance based energy economy pbee the pbee applies the combined concepts of the performance economy and energy services to the energy sector energy service companies escos are discussed as an example of pbee practices the implications for energy suppliers and consumers as well as the conditions for pbee diffusion and consequences for technological change are also explored the expected environmental social and economic benefits are described however absolute consumption and emissions reductions may prove elusive due to the rebound effect in order to forestall rebound led increases complementary policy measures likely to lead to absolute reductions are required

house prices and consumption inequality i characterize how house price shocks affect consumption inequality using a life cycle model of housing and nonhousing consumption with incomplete markets i derive analytical expressions for the dynamics of inequalities and use these to analyze large house prices swings seen in the uk i show that movements in consumption inequality were large that they correspond with the theoretical predictions qualitatively and that the model explains a large fraction of the movements quantitatively i demonstrate the accuracy of this analysis using an extended model s full non linear solution finally accounting for house price shocks alters estimates of labour income risks using cross sectional data

a model of mortgage default in this paper we solve a dynamic model of households mortgage decisions incorporating labor income house price inflation and interest rate risk using a zero profit condition for mortgage lenders we solve for equilibrium mortgage rates given borrower characteristics and optimal decisions the model quantifies the effects of adjustable versus fixed mortgage rates loan to value ratios and mortgage affordability measures on mortgage premia and default mortgage selection by heterogeneous borrowers helps explain the higher default rates on adjustable rate mortgages during the recent u s housing downturn and the variation in mortgage premia with the level of interest rates

light emitting diodes and the lighting revolution the emergence of a solid state lighting industry emergence of new industries from evolving technologies is critical to the global economy yet has been relatively understudied due to the paucity of available data this study draws lessons on industry emergence by analyzing how a solid state lighting ssl industry grew out of light emitting diode led technologies that evolved for half a century with participation by tens of thousands of researchers in universities national laboratories and firms using data on publications patents and firms combined with business history we trace the evolution of ssl through a succession of market niches at times a few researchers with unorthodox research approaches made breakthroughs that greatly advanced particular technology trajectories and pushed led research in unexpected directions a succession of led market niches advanced the technology and provided profits to incentivize continuing research while reducing cost and improving efficacy of leds innovating firms developed a thicket of patents and captured substantial profit but were embroiled in extensive litigation that was ultimately resolved through cross licensing a major new generation of lighting products is now disrupting the traditional lighting industry although the leading incumbent lighting firms all invested early and heavily in ssl the industry s future leadership is uncertain

taxes and stock return seasonality evidence from the london stock exchange prior to the introduction of capital gains taxes seasonality is not detected in the returns of firms that traded on the london stock exchange however after the imposition of a capital gains tax the british stock return data exhibit apparent monthly effects in both jan uary and april additional analysis reveals that while the april effect is consistent with the tax loss selling hypothesis the january effect cannot be attributed solely to the introduction of capital gains taxation furthermore the authors efforts indicate that much caution should be exercised when interpreting studies that compare results from non u s data sources with those from u s data copyright 1987 by the university of chicago

misspecification of capital asset pricing this study documents empirical anomalies which suggest that either the simple one period capital asset pricing model capm is misspecified or that capital markets are inefficient in particular portfolios based on firm size or earnings price e p ratios experience average returns systematically different from those predicted by the capm furthermore the abnormal returns persist for at least two years this persistence reduces the likelihood that these results are being generated by a market inefficiency rather the evidence seems to indicate that the equilibrium pricing model is misspecified however the data also reveals that an e p effect does not emerge after returns are controlled for the firm size effect the firm size effect largely subsumes the e p effect thus while the e p anomaly and value anomaly exist when each variable is considered separately the two anomalies seem to be related to the same set of missing factors and these factors appear to be more closely associated with firm size than e p ratios

catalysing the energy service market the role of intermediaries the uk market for energy service contracts is expanding owing in part to the emergence of intermediaries for those contracts in different parts of the public sector these intermediaries combine a legal framework for establishing contracts with an organisational framework that facilitates contract negotiation and execution this paper examines the nature and operation of these intermediaries in more detail including their achievements to date and their similarities and differences it uses ideas from transaction cost economics to develop a theoretical model of the contracting decision and shows how intermediary organisations can lower the transaction costs incurred by both clients and contractors thereby increasing the viability of contracting the paper argues that intermediaries can play an important role in expanding the market for energy service contracts and hence in delivering cost effective energy efficiency improvements throughout the public sector

a dynamic model of housing demand estimation and policy implications in the u s macroeconomic policy makers are concerned about how consumers will respond to falling incomes nominal home prices falling income rising mortgage interest rates and tightening credit standards in order to address these questions we estimate and simulate a dynamic structural model of housing demand in the model consumers maximize expected discounted lifetime utility from housing services and a composite consumption good the model allows for realistic features of the housing market including non convex adjustment costs from buying and selling a home and credit constraints from minimum downpayment requirements we use the forward simulation procedure of bajari benkard and levin 2007 to estimate the structural parameters especially the elasticity of substitution between consumption and housing services using data from the panel study of income dynamics given the estimated model parameters we simulate the partial equilibrium consumption and housing and

the association between accounting earnings and security returns for large and small firms abstract the differential information hypothesis advanced by atiase 1980 states that information production and dissemination by private parties for the purpose of identifying mispriced securities is an increasing function of firm size this study examines two corollaries of that hypothesis first security prices of large firms anticipate accounting earnings earlier than security prices of small firms second for a given level of unexpected earnings the cumulative abnormal returns of small firms exceed those of large firms the results are generally consistent with atiase s hypothesis

the determinants of attitudes towards strategic default on mortgages we use survey data to measure households propensity to default on mortgages even if they can afford to pay them strategic default when the value of the mortgage exceeds the value of the house the willingness to default increases in both the absolute and the relative size of the home equity shortfall our evidence suggests that this willingness is affected by both pecuniary and non pecuniary factors such as views about fairness and morality we also find that exposure to other people who strategically defaulted increases the propensity to default strategically because it conveys information about the probability of being sued

the aftermarket performance of small firm initial public offerings abstract the dream of many entrepreneurs is to some day take his or her growing small firm public and to thereby become the ceo of a publicly traded corporation currently entrepreneurs are continuing to utilize initial public offerings ipos as a viable source of venture financing ipos also represent a viable mechanism for harvesting venture capital and entrepreneurial investments the touted entrepreneurial benefits of taking a company public include the abilities to borrow additional funds return to the public equity market negotiate mergers without depleting cash the potential for enhanced personal wealth and so forth investors in small firm public equity issues are often motivated by the potential for discovering another apple computer or perhaps an ibm at the ground floor this study empirically examines the aftermarket returns of small publicly held firms that have issued initial public offerings aftermarket returns refers to stock returns immediately after a stock begins trading the study specifically examines two questions first is there a positive risk return relationship for small firm aftermarket returns where higher firm risk will generate higher aftermarket return second will aftermarket returns show on industry effect where certain industries will automatically generate higher returns answers to these questions will affect the strategic financial alternatives available to entrepreneurs both before and after going public and will also affect the decisions of investors interested in financing small public corporations the research findings indicate that entrepreneurs planning to take younger firms public will probably not have available to them numerous subsequent financial alternatives utilizing corporate stock if the true aftermarket performance of their stock is taken into consideration likewise investors in small firm public issues may also be disappointed in the aftermarket performance of younger firms a positive risk return relationship where age was a proxy measure of risk did not exist this was true even though the initially quoted returns of these same younger firms may have been substantial on the other hand the aftermarket performance of older firms is typically favorable finally the study suggests that neither entrepreneurs nor investors should bet solely on a particular industry categorization to carry their aftermarket stock performance while certain industries indicated significant positive initial returns aftermarket returns based on industry classification were generally not statistically significant investors should therefore always exercise firmspecific due diligence and research before investing in small firm public equity issues since the variance of their aftermarket market returns tends to be large

a snapshot of the european energy service market in 2010 and policy recommendations to foster a further market development abstract as of 2010 the energy service market in europe is still far from utilising its full potential wide scale peer reviewed studies investigating the development and up to date status of the european esco market are scarce this article presents a comprehensive insight of the european esco industry based on the results from a large scale survey carried out 2009 2010 in 39 european countries the observed market development during the period 2007 2010 trends in business practices and factors influencing the esco industry evolution are described finally having considered the remaining barriers and the supporting factors as well as the successful experiences in europe policy measures that could further promote esco activities are proposed

econometric properties of alternative security return methods in recent years security price research has experienced a proliferation of research designs as a result there is a lack of interstudy comparability which is aggravated by the absence of a formal analysis of the properties of the alternative designs under various conditions the purpose here is to examine one important aspect of research design the choice of the security return measure in a simple but well defined setting of limited parameter uncertainty the analysis leads to the following results 1 with respect to raw returns versus residual returns it explicitly offers three potential rationales for residual returns as such the analysis provides a formal statement of the reasons for residual analyses to supplement the intuitive but less precise statements in the early literature 2 with respect to residual return versus difference in returns methods the analysis indicates the conditions under which a the residual approach dominates the difference in returns approach as judged by the statistical criteria examined b the converse holds and c the two methods possess the same econometric properties 3 the relative properties described in 2 are derived for a general model of nonzero covariation among returns and for two important special cases the zero beta model and the industry effects model

mandated accounting changes and debt covenants the case of oil and gas accounting abstract the relationships among mandated accounting changes bond covenants and security prices has been the focus of several studies these studies have provided mixed evidence on the existence of a bond covenant effect on security prices this paper suggests that inconclusive prior results are a consequence of inappropriately measuring the default risk of debt using an option pricing framework it is shown that the debt to equity alone is not an adequate measure of default risk in particular both the debt to equity ratio and the total risk of the firm are necessary to adequately model the bond covenant effects of an accounting change these theoretical propositions are supported by the empirical analysis of the security market reaction to changes in oil and gas accounting

a dynamic model of housing demand estimation and policy implications a dynamic model of housing demand using data from the panel study of income dynamics psid we specify estimate and simulate a dynamic structural model of housing demand our model generalizes previous applied econometric work by incorporating realistic features of the housing market including non convex adjustment costs from buying and selling a home credit constraints from minimum downpayment requirements and uncertainty about the evolution of incomes and home prices we argue that these features are critical for capturing salient features of housing demand observed in the psid after estimating the model we use it to simulate how consumer behavior responds to house price and income declines as well as tightening credit these experiments are motivated by the u s recession starting in december of 2007 that saw large falls in home prices large negative income shocks for many households and tightening credit standards in the short run relatively few households adjust their housing stock households respond instead by reducing non housing consumption and reducing wealth because they wish to avoid losing their home and the associated adjustment costs households that adjust in the short run are those hit with a series of bad shocks such as a negative income shock and a home price decline a larger proportion of households do adjust their consumption in the long run increasing their housing stock since housing is less expensive however such changes may occur several years after the shocks listed above

macroeconomic effects of the mortgage refinance and the home equity lines of credit abstract i examine how the mortgage refinance and the home equity lines of credit heloc impact the increase in pre crisis mortgage debt and post crisis mortgage defaults financially constrained homeowners can cash out funds through refinancing mortgages or extract home equity through heloc my quantitative exercise shows that prevalent usage of refinancing increases pre crisis mortgage debt which amplifies the post crisis foreclosure rate heloc also contributes to an increase in mortgage defaults though it negligibly impacts pre crisis mortgage debt

non durable consumption and housing net worth in the great recession evidence from easily accessible data abstract in an influential paper mian rao and sufi 2013 exploit geographic variation to measure the effect of the fall in housing net worth on household expenditures during the great recession their widely cited estimates are based on proprietary house price and proprietary expenditure data and therefore not easily replicable we use alternative data on a subset of non durable goods and on house prices which are more easily accessible to replicate their study when estimating their same specification on our data we obtain values for the elasticity of expenditures to the housing net worth shock that are virtually indistinguishable from theirs however our robustness analyses with respect to alternative model specifications yield more nuanced conclusions about the separate roles of house prices and initial housing exposure leverage for the drop in expenditures moreover the estimated elasticity is consistent theoretically and quantitatively with a simple calibrated model with wealth effects where leverage and credit constraints play no role

phasing out the gses we develop a new model of the mortgage market where both borrowers and lenders can default risk tolerant savers act as intermediaries between risk averse depositors and impatient borrowers the government plays a crucial role by providing both mortgage guarantees and deposit insurance underpriced government mortgage guarantees lead to more and riskier mortgage originations as well as to high financial sector leverage mortgage crises occasionally turn into financial crises and government bailouts due to the fragility of the intermediaries balance sheets increasing the price of the mortgage guarantee crowds in the private sector reduces financial fragility leads to fewer but safer mortgages lowers house prices and raises mortgage and risk free interest rates due to a more robust financial sector consumption smoothing improves and aggregate welfare increases while borrowers are nearly indifferent to a world with or without mortgage guarantees savers are substantially better off while aggregate welfare increases so does wealth inequality jel g12 g15 f31

what encourages local authorities to engage with energy performance contracting for retrofitting evidence from german municipalities municipalities aiming at mitigating climate change by implementing new energy efficiency technologies face budgetary and capacity constraints outsourcing through energy service contracting could provide a solution this paper reports results from a survey of 1298 municipalities concerning barriers to retrofitting public street lighting and the possible role of energy service contracting to overcome these barriers using a logistic regression analysis the authors investigate determinants of opting for energy service contracts in the specific context of led retrofits results point to an advantage of outsourcing in a financially and capacity constrained environment which corresponds with the main reasons for engaging in contracting minimising investments and financial risks however municipalities often do not fully grasp the risks associated with retrofitting especially using a novel technology such as led in relation to that they underestimate the risk reduction potential of energy performance contracts epc previous experience with outsourcing increases the probability to engage in servitization although certain existing partnerships particularly with utilities prevent municipalities from considering energy performance contracts interestingly engaging an energy consultant has a negative propensity to use energy service contracts while pre negotiated standardised contracts for energy performance contracts have a positive influence

leverage and the foreclosure crisis how much of the foreclosure crisis can be explained by the large number of high leverage mortgages originated during the housing boom in our model heterogeneous households select from mortgages with different down payments and choose whether to default given income and housing shocks the use of low down payment loans is initially limited by payment to income requirements but becomes unrestricted during the boom the model approximates key housing and mortgage market facts before and after the crisis a counterfactual experiment suggests that the increased number of high leverage loans originated prior to the crisis can explain over 60 percent of the rise in foreclosure rates

houses as atms mortgage refinancing and macroeconomic uncertainty we estimate a structural model of household liquidity management in the presence of long term mortgages households face counter cyclical idiosyncratic labor income uncertainty and borrowing constraints which aect optimal choices of leverage precautionary saving in liquid assets and illiquid home equity debt repayment mortgage renancing and default taking the observed historical path of house prices aggregate

the relation between common stock returns trading activity and market value this study examines the relation between common stock returns trading activity and market value our results indicate that although firm size and trading activity are highly correlated differences in trading activity are not the underlying reason for the firm size anomaly the finding of systematic differences in risk adjusted returns across stocks of firms of different size recent empirical research has revealed systematic differences in risk adjusted returns for common stocks of firms of different sizes as measured by the market value of outstanding common stock see banz 1 and reinganum 5 roll 7 in a recent paper has suggested that the firm size anomaly may result from errors in risk measurement in particular roll suggested that because small firms trade less frequently than large firms risk measures obtained from daily or weekly returns data may seriously underestimate the risk associated with holding a portfolio of small firms in response to roll s conjecture reinganum 6 examined the risk adjusted returns of portfolios formed on the basis of firm size using both the scholes williams 8 and the dimson 2 aggregated coefficient method of estimating portfolio betas and found that regardless of the beta estimation technique employed differences in estimated betas were insufficient to account for differences observed in the returns of size ranked portfolios if reinganum s 6 finding is correct that the firm size effect is not attributable to a misassessment of risk and if smaller firms trade less frequently than do larger firms then firm size may merely proxy for trading activity 1 thus the observed firm size effect may be explained in terms of a liquidity premium associated with inactively traded shares the purpose of this paper is to determine whether or not the firm size anomaly is explicable in terms of differences in the trading activity of common stocks a liquidity premium would provide a logically appealing explanation for the firm size effect tinic 11 demsetz 3 and others have argued that transactions costs vary inversely with trading activity as measured by average number of

cost of capital to the hospital sector this paper provides estimates of the cost of equity and debt capital to for profit and non profit hospitals in the u s for the years 1972 83 the cost of equity is estimated using alternatively the capital asset pricing model and arbitrage pricing theory we find that the cost of equity capital using either model substantially exceeded anticipated inflation the cost of debt capital was much lower accounting for the corporate tax shield on debt and capital paybacks by cost based insurers lowered the net cost of capital to hospitals

an empirical study of selected factors influencing the decision to list on foreign stock exchanges the growing internationalization of capital markets suggests that an increasing number of firms perceive the benefits of listing their stocks on foreign exchanges as outweighing the related costs many other firms however still limit listing their securities to their domestic exchanges this study investigates the motives for listing abroad the empirical analyses based on data on 481 multinationals indicate significant association between the likelihood of listing abroad and 1 the relative size of a firm in its domestic capital market 2 the ratio of foreign to total sales

are seasonal anomalies real a ninety year perspective in recent years there has been a proliferation of empirical studies documenting unexpected or anomalous regularities in security rates of return in addition to the widely studied relation between firm size and rate of return 1 these include seasonal regularities related to the time of the day harris 1986 the day of the week see ball and bowers 1986 cross 1973 french 1980 gibbons and hess 1981 jaffe and westerfield 1985 keim and stambaugh 1984 and lakonishok and levi 1982 the time of the month ariel 1987 and the turn of the year see haugen and lakonishok 1988 jones pearce and wilson 1987 lakonishok

event study methodologies and the size effect abstract this study of 862 press recommendations demonstrates that the size effect can distort longer term performance measures and hence event studies relative to similar sized companies post publication performance is neutral however market adjustments the capm and market model with equally or capitalization weighted indexes all produce biased results event studies are most exposed to such bias when the measurement interval is long event securities differ systematically in size or weighting from the index constituents the size effect is large and or volatile and when capm type methodologies are used these distortions are avoided by explicitly controlling for size

overreaction underreaction and the low p e effect although earnings surprises have been studied extensively they have not been examined in the context of contrarian strategies positive and negative earnings surprises affect best high p e and worst low p e stocks in an asymmetric manner that favors worst stocks long term reversion to the mean in which worst stocks display above market returns while best stocks show below market results regardless of the sign of the surprise continues for at least 19 quarters following the news these results are consistent with mispricing overreaction to events prior to the surprise and a corrective price movement after the surprise is consistent with extant research on underreaction the mispricing correction hypothesis explains the superior returns of contrarian strategies noted here and elsewhere in the literature

transaction costs and asset prices a dynamic equilibrium model in this article we study the effects of transaction costs on asset prices we assume an overlapping generations economy with a riskless liquid bond and many risky stocks carrying proportional transaction costs we obtain stock prices and turnover in closed form surprisingly a stock s price may increase in transaction costs and a more frequently traded stock may be less adversely affected by an increase in transaction costs calculations based on the marginal investor overestimate the effects of transaction costs for realistic parameter values transaction costs have very small effects on stock prices but large effects on turnover

survey evidence on diffusion of interest and information among investors abstract questionnaire surveys of institutional and individual investors were undertaken to learn about patterns of communications it was found that direct interpersonal communications are very important in investor decisions questions elicited what fraction of investors were unsystematic and allowed themselves to be influenced by word of mouth communications or other salient stimuli randomly sampled investors were studied as well as investors in stocks whose price had recently increased dramatically contagion or epidemic models of financial markets are proposed in which interest in individual stocks is spread by word of mouth the survey evidence is interpreted as supporting such models

the seasonal stability of the factor structure of stock returns this paper investigates the month by month stability of a daily returns and correlation coefficients of stock returns b correlation and covariance matrices c number of return generating factors and d the apt pricing relationship the results show that there is a january effect and a small firm effect in stock returns correlation matrices are more stable than covariance matrices but both types of matrices are not stable across months and across the sample groups the number of return generating factors is rather stable most of the time and for most of the sample groups but there is some significant instability that is related to the average correlation coefficients among stocks the apt pricing relationship does not seem to be supported by the two stage process using the maximum likelihood factor analysis the seasonality of common stock returns has received considerable attention in financial economics research studies by officer 23 rozeff and kinney 29 gultekin and gultekin 11 and others have investigated the stock returns of the u s and other countries on a monthly basis they generally have found that on average january returns are significantly higher than the returns for other months banz 1 and reinganum 25 26 have found abnormally high returns in small market value firms and keim 17 has related this to the first few trading days of january schwert 30 points out the current difficulty of explaining these empirical regularities and the need for further investigations several studies have examined seasonality in risk premiums rozeff and kinney 29 found that seasonality appeared in the risk premiums obtained from a twoparameter capm and that january displayed a relatively large risk premium compared with the other months keim 16 also found seasonality in the risk premiums more recently tinic and west 32 examined the risk premiums of the two parameter capm and observed the previously reported seasonality and high january premium they also found that january is the only month in which there is a consistently positive statistically significant relationship between expected return and risk very recently using the two stage procedure with the

demand pull government policies to support product service system activity the case of energy service companies escos in the uk product service systems psss constitute a family of service based business models designed to satisfy our societal needs in an economically and environmentally sustainable manner to date however pss application has remained niche due to a variety of critical barriers this paper explores how demand pull national government policies could support pss activity by addressing these barriers and cultivating market demand lessons are drawn from a case study of how regulatory economic incentive informative and procurement policies have supported energy service company esco activity in the uk a sub set of the pss family focused on energy service provision subsequently five policy recommendations are presented to support pss activity 1 balancing economic incentives and regulatory disincentives 2 promoting indirect policy support 3 redesigning existing market structures 4 promoting locally led pss activity and 5 creating stable policy frameworks the paper warns however that national government policy cannot easily address all pss barriers such as customer preferences international developments technological progress and inherent business model weaknesses pointing to the need for other complementary solutions furthermore other governance actors beside national government could also implement pss supporting policies

options short sales and market completeness this paper presents empirical evidence that trading in options contributes to both transactional and informational efficiency of the stock market by reducing the effect of constraints on short sales the significantly higher average level of short interest exhibited by optionable stocks supports the argument that options facilitate short selling we also find significant effects on option prices related to the short interest in the underlying stock we then present evidence that options also increase information efficiency earlier work that is replicated and extended here has suggested that short sale constraints cause stock prices to underweight negative information options appear to reduce that effect

uk local authority engagement with the energy service company esco model key characteristics benefits limitations and considerations abstract this paper explores how some uk local authorities las have opted to engage with the energy service company esco model in a bid to enhance their influence over local energy system change and help them to deliver on their political public good objectives three common approaches to la esco model engagement are outlined including the 1 la owned arm s length model 2 private sector owned concession agreement model and 3 community owned and run model the la s decision to establish its own esco or alternatively enter into a partnership with another predominantly depends on its willingness to expose itself to risk the level of strategic control it desires and the resources it has at its disposal however the business case is contingent on the extent to which the national policy and regulatory framework facilitates and obligates las to play an active energy governance role stronger alignment of local and national energy agendas through communication and coordination between different governance actors could help to remove critical barriers to la esco engagement and their wider energy governance activities

negative equity and foreclosure theory and evidence abstract recent declines in housing prices have focused attention on the relationship between negative housing equity and mortgage default theory implies that negative equity is a necessary condition for default but not a sufficient one this often misunderstood result is clearly illustrated in a dataset of massachusetts homeowners during the early 1990s fewer than 10 percent of borrowers likely to have had negative equity at the end of 1991 experienced a foreclosure during the following three years an econometric model of default estimated on two decades of massachusetts housing data also predicts low default rates for current negative equity borrowers we develop a simple theoretical model to interpret these empirical findings and to assess potential foreclosure reduction policies our results imply that lenders and policymakers face an information problem in trying to help borrowers with negative equity because it is hard to determine which owners really need help in order to stay in their homes

housing over time and over the life cycle a structural estimation we estimate a structural model of optimal life cycle housing and nonhousing con sumption in the presence of labor income and house price uncertainties the model postulates constant elasticity of substitution between housing service and nonhousing consumption and explicitly incorporates a housing adjustment cost our estimationts the cross sectional and time series household wealth and housing proles from the panel study of income dynamics 1984 to 2005 reasonably well and suggests an intratemporal elasticity of substitution between housing and nonhousing consumption of 0 487 the low elasticity estimate is largely driven by moments conditional on state house prices and moments in the latter half of the sample period and is robust to different assumptions of housing adjustment cost we then conduct policy analyses in which we let house price and income take values as those observed between 2006 and 2011 we show that the responses depend importantly on the housing adjustment cost and the elasticity of sub stitution between housing and nonhousing consumption in particular compared with the benchmark the impact of the shocks on homeownership rates is reduced but the impact on nonhousing consumption is magnied when the house selling cost is sizable or when housing service and nonhousing consumption are highly substitutable

systematic monetary policy and the macroeconomic effects of shifts in residential loan to value ratios what are the macroeconomic consequences of changing aggregate lending standards in residential mortgage markets as measured by loan to value ltv ratios using a structural vector autoregression var we find that gdp and business investment increase following an expansionary ltv shock residential investment by contrast falls after a small initial uptick a result that depends on the systematic reaction of monetary policy we show that historically the fed tended to respond to expansionary ltv shocks by raising the monetary policy instrument and as a result mortgage rates increased and residential investment declined house prices are affected in a similar manner

the co evolutionary relationship between energy service companies and the uk energy system implications for a low carbon transition abstract the energy service company esco business model is designed to reward businesses by satisfying consumers energy needs at less cost and with fewer carbon emissions via energy demand management and or sustainable supply measures in contrast the revenue of the incumbent energy utility company euco model is coupled with the sale of units of energy which are predominantly sourced from fossil fuels the latter is currently dominant in the uk this paper addresses two questions first why has the esco model traditionally been confined to niche applications second what role is the esco model likely to play in the transition to a low carbon uk energy system to answer these the paper examines the core characteristics of the esco model relative to the euco model the paper then examines how escos have co evolved with the various dimensions of the energy system i e ecosystems institutions user practices technologies and business models to provide insight into how escos might help to shape the future uk energy system we suggest that institutional and technological changes within the uk energy system could result in a more favourable selection environment for escos consequently enabling the esco model to proliferate at the expense of the euco model