Essays on Market Frictions in the Real Estate Market

Open Access
Author:
Park, Sun Young
Graduate Program:
Business Administration
Degree:
Doctor of Philosophy
Document Type:
Dissertation
Date of Defense:
June 15, 2012
Committee Members:
  • Brent William Ambrose, Dissertation Advisor
  • Brent William Ambrose, Committee Chair
  • Austin Jay Jaffe, Committee Member
  • N Edward Coulson, Committee Member
  • Jiro Yoshida, Committee Member
  • Jingzhi Huang, Committee Member
Keywords:
  • real estate market
  • market friction
  • segmentation
  • loss aversion
Abstract:
The real estate market is generally considered a less complete asset market than other financial asset markets in that real estate assets carry higher holding costs than other financial assets do. Thus, the real estate market is a good laboratory in which to explore the topic of market frictions. If a market were perfectly liquid such that no market frictions exist, the efficient market hypothesis would hold. However, as the 2007–2008 financial crisis has shown, market frictions arise for various reasons: asymmetric information, transaction costs, and financial constraints. The law of one price does not hold under the existence of market frictions. Thus, market frictions have important implications for the limits of arbitrage. It is important to understand the impact of market frictions and the ways in which they call into question the principles of classical economics. In order to examine market frictions, I focus on two categories: liquidity and segmentation. My dissertation offers a consideration of market frictions as follows: Chapter 1 presents an overview of market frictions in the real estate market together with an outline of the dissertation; Chapter 2 examines the spill-over impact of liquidity shocks in the commercial real estate market; Chapter 3 considers market segmentation by investor type in the commercial real estate market; Chapter 4 focuses on the liquidity spiral between market liquidity and loss aversion; and Chapter 5 presents concluding remarks.