Uses of Equilibrium Models in Real Estate Research

Dice Center For Research In Financial Economics, Working Paper Series 96-12

23 Pages Posted: 6 Feb 1997

See all articles by Patric H. Hendershott

Patric H. Hendershott

University of Aberdeen - Centre for Property Research; National Bureau of Economic Research (NBER)

Abstract

Equilibrium analysis is a valuable tool in real estate investment research. In this survey, I show how equilibrium models have been used to estimate the required risk premium for different classes of real estate, to explain housing prices and rents, and to determine investment rental market adjustment and valuation (as well as to predict future rent, price and value developments).

Equilibrium analysis, combined with option theory, has also increased our understanding of differences in coupon/rental rates on loans/leases with different contract provisions (or our understanding of differences in values of contracts with different provisions but the same coupon/rental rates). Because the work on leases has lagged that on loans or mortgages, application of the mortgage research methodology to leases is an especially fertile area for research.

JEL Classification: L85

Suggested Citation

Hendershott, Patric H., Uses of Equilibrium Models in Real Estate Research. Dice Center For Research In Financial Economics, Working Paper Series 96-12, Available at SSRN: https://ssrn.com/abstract=15173 or http://dx.doi.org/10.2139/ssrn.15173

Patric H. Hendershott (Contact Author)

University of Aberdeen - Centre for Property Research ( email )

Aberdeen AB24 2UF
Scotland

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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