Dissecting the 2007–2009 Real Estate Market Bust: Systematic Pricing Correction or Just a Housing Fad?

Daniele Bianchi, Massimo Guidolin and Francesco Ravazzolo

Journal of Financial Econometrics, 2018, vol. 16, issue 1, 34-62

Abstract: We use a flexible Bayesian model averaging method to estimate a factor pricing model characterized by structural uncertainty and instability in macro-financial factor loadings and idiosyncratic risks. We propose such a framework to investigate key differences in the pricing mechanism that applies to residential versus non-residential real estate investment trusts (REITs). An analysis of cross-sectional mispricings reveals no evidence of pure housing/residential real-estate abnormal returns inflating between 1999 and 2007, to subsequently collapse. In fact, all REITs sectors record increasing alphas during this period, and show important differences in the dynamic evolution of risk factors exposures.

Keywords: Bayesian econometrics; I-CAPM; mispricing; model uncertainty; REIT; stochastic breaks (search for similar items in EconPapers)
JEL-codes: C11 C58 E44 G12 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (3)

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Working Paper: Dissecting the 2007-2009 real estate market bust: systematic pricing correction or just a housing fad? (2013)
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