Investor Rationality and House Price Bubbles: The Case of Berlin and the German Reunification
Oliver Holtemöller, R. Schulz
German Economic Review,
2010
Abstract
We analyze the behavior of investors in the Berlin rental apartment house market over the years 1980–2004. Using constant-quality multipliers (price–rent ratios), we reject the hypothesis that multipliers in the market were set in a rational manner. Supported by narrative evidence, we conjecture that investors misjudged the economic effects of the German reunification. To examine this, we employ a stylized structural economic model and analyze the effects of shocks on rational multipliers. It seems that investors confused the reunification with a permanent supply side shock to the economy. By basing their investment decisions on this misjudgement, investors behaved irrationally, but in a very uncertain and unprecedented environment.
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Energy Efficiency of the Housing Stock: Are potential savings overrated?
Claus Michelsen, S. Müller-Michelsen
Wirtschaft im Wandel,
No. 9,
2010
Abstract
Ein zentrales Element der europäischen Klimaschutzpolitik ist die Reduktion des Energieverbrauchs privater Haushalte. Im Fokus stehen dabei Wohnimmobilien, insbesondere im Mehrfamilienhausbestand. Die Energieeinsparverordnung
(EnEV 2009) fordert deshalb eine deutliche Reduktion des Energiebedarfs bei Sanierungen bzw. beim Neubau von Wohnimmobilien. Allerdings sind diese Vorgaben weitgehend undifferenziert, was Alter und Art einer Immobilie sowie die
Marktbedingungen betrifft, unter denen errichtet oder saniert wird. Der vorliegende Artikel zeigt auf Grundlage eines umfangreichen Datensatzes des Energiedienstleisters ista Deutschland GmbH, dass die Energiekennwerte von Mehrfamilienhäusern abhängig vom Jahr ihrer Errichtung sowohl im sanierten
als auch im unsanierten Zustand deutlich variieren. Die Daten zeigen zudem, dass die allgemein angenommenen Einsparpotenziale, die sich vor allem am technisch Machbaren orientieren, die Realität erheblich überschätzen. So sind die tatsächlichen Verbräuche in unsanierten Immobilien und die unter Marktbedingungen realisierten Energieeinsparungen nach einer Sanierung teilweise
deutlich geringer als bisher angenommen. Eine bautechnische und architektonische Betrachtung legt die Vermutung nahe, dass unterschiedliche
Sanierungskostenverläufe und die Bestandseigenschaften des Altbaus zu den beobachtbaren Differenzen beitragen. Im Ergebnis sprechen die hier präsentierten Zahlen für eine differenziertere Strategie, die sowohl die Belange der Wirtschaftlichkeit von Sanierungen, als auch die Belange des Klimaschutzes und Städtebaus berücksichtigt. Konkret bedeutet dies, dass sich die spezifischen
Eigenschaften von Immobilien auch in den rechtlichen Vorgaben und der Förderpolitik niederschlagen sollten, um Investitionsanreize auch tatsächlich
zu setzen.
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FDI and the National Innovation System - Evidence from Central and Eastern Europe
Jutta Günther, Björn Jindra, Johannes Stephan
D. Dyker (ed.), Network Dynamics in Emerging Regions of Europe, Imperial College Press,
2010
Abstract
The paper investigates strategic motives, technological activities and determinants of foreign investment enterprises’ embeddedness in post-transition economies (Eastern Germany and selected Central East European countries). The empirical study makes use of the IWH FDI micro database. Results of the descriptive analysis of investment motives show that market access dominates over efficiency seeking and other motives. The majority of investors are technologically active in the region as a whole, but countries differ in terms of performance. The probit model estimations show that firm specific characteristics, among them innovativeness and autonomy from parent company, are important determinants of foreign investment enterprises’ embeddedness.
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Monopolistic Competition and Costs in the Health Care Sector
Ingmar Kumpmann
IWH Discussion Papers,
No. 17,
2009
Abstract
Competition among health insurers is widely considered to be a means of enhancing efficiency and containing costs in the health care system. In this paper, it is argued that this could be unsuccessful since health care providers hold a strong position on the market for health care services. Physicians exert a type of monopolistic power which can be described by Chamberlin’s model of monopolistic competition. If many health insurers compete with one another, they cannot counterbalance the strong bargaining position of the physicians. Thus, health care expenditure is higher, financing either extra profits for physicians or a higher number of them. In addition, health insurers do not have an incentive to contract selectively with health care providers as long as there are no price differences between physicians. A monopolistic health insurer is able to counterbalance the strong position of physicians and to achieve lower costs.
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The Identification of Technology Regimes in Banking: Implications for the Market Power-Fragility Nexus
Michael Koetter, Tigran Poghosyan
Journal of Banking and Finance,
No. 8,
2009
Abstract
Neglecting the existence of different technologies in banking can contaminate efficiency, market power, and other performance measures. By simultaneously estimating (i) technology regimes conditional on exogenous factors, (ii) efficiency conditional on risk management, and (iii) Lerner indices of German banks, we identify three distinct technology regimes: Public & Retail, Small & Specialized, and Universal & Relationship. System estimation at the regional level reveals that greater bank market power increases bank profitability but also fosters corporate defaults. Corporate defaults, in turn, lead to higher probabilities of bank distress, which supports the market power-fragility hypothesis.
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Lending Technology, Bank Organization and Competition
Hans Degryse, Steven Ongena, Günseli Tümer-Alkan
Journal of Financial Transformation,
2009
Abstract
This paper reviews recent theoretical and empirical studies investigating how both bank technology and organization shape bank-borrower interactions. We refer to two related concepts for bank technology. First, the technologies banks employ in loan granting decisions and second, the advances in information technology linked to the bank's lending technology. We also summarize and interpret the theoretical and empirical work on bank organization and its influence on lending technologies. We show that the choice of lending technology and bank organization depend heavily on the availability of information, the technological progress in the collection of information, as well as the banking market structure and the legal environment. We draw important policy conclusions from the literature. Competition authorities and supervisors have to remain alert to the consequences of the introduction of any new technology because: (1) advances in technology do not necessarily lead to more intense banking competition, and (2) the impact of technological and financial innovation on financial efficiency and stability depends on the incentives of the entire „loan production chain.‟
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Are European Equity Style Indices Efficient? – An Empirical Quest in Three Essays
Marian Berneburg
Schriften des IWH,
No. 28,
2008
Abstract
Many situations in the history of the stock markets indicate that assets are not always efficiently priced. But why does it matter whether the stock market is efficiently priced? Because “well-functioning financial markets are a key factor to high economic growth”. (Mishkin and Eakins, 2006, pp. 3-4) In three essays, it is the aim of the author to shed some more light on the topic of market efficiency, which is far from being resolved. Since European equity markets have increased in importance globally, the author, instead of focusing on US markets, looks at a unified European equity market. By testing for a random walk in equity prices, revisiting Shiller’s claim of excess volatility through the means of a vector error correction model, and modifying the Gordon-Growth-Model, the book concludes that a small degree of inefficiency cannot be ruled out. While usually European equity markets are pricing assets correctly, some periods (e.g. the late 1990s and early 2000s) show clear signs of mispricing; the hypothesis of a world with two states (regime one, a normal efficient state, and regime two, a state in which markets are more momentum driven) presents a possible explanation.
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Exchange Rates and FDI: Goods versus Capital Market Frictions
Claudia M. Buch, J. Kleinert
World Economy,
forthcoming
Abstract
Changes in exchange rates affect countries through their impact on cross-border activities such as trade and foreign direct investment (FDI). With increasing activities of multinational firms, the FDI channel is likely to gain in importance. Economic theory provides two main explanations why changes in exchange rates can affect FDI. According to the first explanation, FDI reacts to exchange rate changes if there are information frictions on capital markets and if investment depends on firms’ net worth (capital market friction hypothesis). According to the second explanation, FDI reacts to exchange rate changes if output and factor markets are segmented, and if firm-specific assets are important (goods market friction hypothesis). We provide a unified theoretical framework of these two explanations. We analyse the implications of the model empirically using a dataset based on detailed German firm-level data. We find greater support for the goods market than for the capital market friction hypothesis.
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Slippery Slopes of Stress: Ordered Failure Events in German Banking
Thomas Kick, Michael Koetter
Journal of Financial Stability,
No. 2,
2007
Abstract
Outright bank failures without prior indication of financial instability are very rare. In fact, banks can be regarded as troubled to varying degrees before outright closure. But failure studies usually neglect the ordinal nature of bank distress. We distinguish four different kinds of increasingly severe events on the basis of the distress database of the Deutsche Bundesbank. Only the worst distress event entails a bank to exit the market. Since the four categories of hazard functions are not proportional, we specify a generalized ordered logit model to estimate respective probabilities of distress simultaneously. We find that the likelihood of ordered distress events changes differently in response to given changes in the financial profiles of banks. Consequently, bank failure studies should account more explicitly for the different shades of distress. This allows an assessment of the relative importance of financial profile components for different degrees of bank distress.
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Systematic Mispricing in European Equity Prices?
Marian Berneburg
IWH Discussion Papers,
No. 6,
2007
Abstract
One empirical argument that has been around for some time and that clearly contra- dicts equity market efficiency is that market prices seem too volatile to be optimal estimates of the present value of future discounted cash flows. Based on this, it is deduced that systematic pricing errors occur in equity markets which hence can not be efficient in the Effcient Market Hypothesis sense. The paper tries to show that this so-called excess volatility is to a large extend the result of the underlying assumptions, which are being employed to estimate the present value of cash flows. Using monthly data for three investment style indices from an integrated European Equity market, all usual assumptions are dropped. This is achieved by employing the Gordon Growth Model and using an estimation process for the dividend growth rate that was suggested by Barsky and De Long. In extension to Barsky and De Long, the discount rate is not assumed at some arbitrary level, but it is estimated from the data. In this manner, the empirical results do not rely on the prerequisites of sta- tionary dividends, constant dividend growth rates as well as non-variable discount rates. It is shown that indeed volatility declines considerably, but is not eliminated. Furthermore, it can be seen that the resulting discount factors for the three in- vestment style indices can not be considered equal, which, on a risk-adjusted basis, indicates performance differences in the investment strategies and hence stands in contradiction to an efficient market. Finally, the estimated discount rates under- went a plausibility check, by comparing their general movement to a market based interest rate. Besides the most recent data, the estimated discount rates match the movements of market interest rates fairly well.
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