Research
Working Papers
"It is Not Easy Being a Flipper: Return-Risk Trade-Off and Term Structure of Idiosyncratic Risk in the Housing Market "(JMP) (with Quan Gan and Wayne Xinwei Wan)
Abstract:
The idiosyncratic risk of capital gains in the housing market is large but declines with the holding period, implying that the excess capital gain returns of short-term flippers are obtained at the cost of bearing high idiosyncratic risk. Using the comprehensive housing transaction records in Hong Kong from 1993 to 2021, we find that although flippers obtained higher annualized returns than long-term buyers by 8.76 percentage points on average, the Sharpe ratio of flippers is lower than that of longterm buyers. The appraisal ratio of novice flippers is significantly lower than that of experienced longterm buyers and is merely comparable to that of novice long-term buyers. Only experienced flippers, who have at least 2 prior trading experiences and constitute less than 20% of the flippers, outperform long-term buyers in terms of risk-adjusted returns. Employing the unique urban and policy setting in Hong Kong, we also provide new empirical evidence that information quality and market liquidity explain the term structure of idiosyncratic risk.
"Announcement of Northern Metropolis Plan Raises Housing Prices, Consumption, and School Enrolment, though Inconclusive on Inequality" (with Yi Fan and Chongyu Wang) (Under Review)
Abstract:
Early-stage evaluation of mega projects is essential for policymaking and follow-up policy adjustment. Using an announcement of the Northern Metropolis Plan in Hong Kong on 6 October 2021 as a quasi-natural experiment, we discerned its immediate impact on housing price, consumption, school enrolment, and longer-term implications on inequality. Drawing from a rich dataset spanning 38,214 housing transaction records, 4.7 million consumption records, and school enrolment data across 18 districts, our difference-in-differences estimates unveil three significant patterns. First, we find a marked 3.9% rise in housing prices in the Northern Metropolis region one year after the announcement, with a profound 6.9% surge in the initial 4 months. Additionally, we discover a swift 4.1% uptick in consumption for residents in the treated region in the same initial 4 months, predominantly within the private housing market possibly with expected housing wealth realization. Last, we observe a rise in school enrolments, mostly likely from bordering mainland China, spanning primary and secondary school levels in the subsequent year. While our findings hint at narrowing cross-region inequality in the global superstar city, they also suggest burgeoning within-region inequality, as benefits seem skewed towards private home occupants. We thus call for policy attention on the affordability and welfare of individuals with lower socioeconomic status in the Northern Metropolis region.
“Cross-market Spillovers of Real Estate Speculation” (with Maggie Rong Hu and Wayne Xinwei Wan)
Abstract:
This study examines the externality of anti-speculation policies and its impact on property market volatility. Employing a rich dataset on property transactions in Hong Kong from 1991 to 2020, we find that, given regulations for flippers in the presale residential property market only, the flippers will flow into the spot residential property market. After implementing the presale-specific anti-speculation policies in 1994, the share of flipping transactions in the spot residential property market increased by 7.68 percentage points more than before the policy. With buyers’ fixed effects, we find that existing flippers in the presale residential property market are 11.92 percentage points more likely to speculate in the spot residential property market thereafter. After the anti-speculation policies extend to the entire residential property market in 2010, there is no evidence demonstrating that the significant cross-market flipper spillover continues to the non-residential property market. Also, in the spot residential property market that flippers spill over into after 1994, the price volatility decreased by 1.56 percentage points, implying the price stabilizing effect of flippers. These findings shed lights on the importance of considering cross-market spillovers in regulating speculations in real estate markets.
“Mass Shooting and Stock Return: Evidence from Commercial Real Estate Market” (with Tingyu Zhou and Michael Chongyu Wang)
Abstract:
This paper is the first to examine the effects of mass shootings on the performance of commercial real estate (CRE) in both the short-term and long-term. Utilizing a novel measure of firm-level geographic exposure to incidents of mass shootings, we find a negative relationship between the exposure of a CRE portfolio to mass shootings and stock market response. Moreover, this relationship is more pronounced in cases of school shootings or spree killings. By employing quarterly data to explore this relationship over a longer term, we find that higher exposure to mass shootings is detrimental to firms’ operational performance, especially for firms specializing in retail properties. However, the adverse consequences can be mitigated through geographic diversification within a CRE portfolio and by enhancing urban resilience.
Presentation
Real Estate Finance and Investment Symposium by HKU, University of Cambridge and UF, Hong Kong, China, 2023
2023 AREUEA International Conference, Cambridge, UK, 2023
The 27th AsRES Conference, Hong Kong, China, 2023
2023 AREUEA-ASSA Conference, New Orleans, USA, 2023
CRIOCM 27th Virtual International Symposium, 2022
The 26th AsRES Conference, Tokyo, Japan, 2022
The 24th AsRES Conference, Shenzhen, China, 2020
Global Chinese Real Estate Congress 2019 Annual Conference, Shanghai, China,2019
The 2nd China Urban Economics Conference, Tianjin, China, 2019
Peer-reviewed Journals
Journal of Real Estate Research (1)