Capital Gain Expectations And Efficiency In The Real Estate Markets

Capital gain expectation is known to be an important determinant of housing price hikes during the real estate booms. Empirically, however, specifying the way expectations about current and future economic variables are formed is a dilemma. Although it is reasonable to assume that economic fundamentals have a significant effect on the investors’ expectation about future gains, a number of housing market analysts claim that expectations of housing prices are extrapolative. This study attempts to investigate the mechanism by which investors’ capital gain expectations and psychology are shaped. The results suggest that housing prices are predictable with respect to capital gain expectations only when these expectations are formed by extrapolation of past price appreciations. Considering the large number of empirical evidence on housing market anomaly with respect to capital gain expectations, the results suggest that the extrapolative expectations can better explain the real estate price behavior than expectations that are formed by economic fundamentals

Causality between FDI and Financial Market Development: Evidence from Emerging Markets

This paper studies the causal relationship between foreign direct investment (FDI) and financial market development (FMD) using panel data from emerging markets. Most studies of the relationship between FDI and FMD have focused on the role of FMD in the link between FDI and economic growth, with no deep understanding of direct causality between FDI and FMD, especially in emerging markets, where financial markets are in the development stage. We document bidirectional causality between FDI and stock market development indicators. For banking sector development indicators, the relationship is ambiguous and inconclusive. Care is therefore needed when analysing the relationship between FMD and FDI, as results may depend on whether the FMD variables used to evaluate causality are stock market or banking sector development indicators

The impact of foreign direct investment on the productivity of China’s automotive industry

• This study contributes to the existing literature by empirically investigating the effect of FDI inflows on the aggregate labour productivity of China's automotive industry. • A production function model is developed using a panel data set at sub-sector level. Two statistical models: pooled ordinary least squares model (POLS) and fixed effects model (FES) were used to estimate the influence of foreign direct investment on aggregate labour productivity in the industry

Economic fundamentals and housing market

This paper examines the causes of housing cycles during 1986-1994 in California using vector autoregressive (VAR) and variance decomposition technique. The paper tries to compare the effect of speculative behavour of landlords with economic fundamentals in boosting the housing demand. The empirical results suggest that economic fundamentals affected the housing market slightly during the housing boom of 1986-1990. Speculative behaviour and expectation of capital gain played a stronger role in stimulating the housing demand than economic fundamentals. The model, however, cannot explain the housing bust of 1990-1994. The results suggest that the main reason behind sluggish demand in 1990-1994 lies outside the economic fundamentals and poor expectation of capital gain.

The wealth effects of bank acquisitions

The purpose of the study is to investigate whether trends in banking mergers between January 1994 and October 1995 are different from previous periods. Specifically, the study focused on greatly increased acquisition prices and interstate consolidations. Abnormal returns and cumulative abnormal returns for a sample of 30 mergers were determined for each situation. The results of the study showed negative effects for shareholders of acquiring banks around the announcement period. Medium-to-small acquisitions, under $1 billion, caused insignificant negative abnormal returns, but large acquisitions, over$1 billion, caused significant negative abnormal returns. At the same time, shareholders in acquired banks of both sizes earned significant positive abnormal returns. The most dramatic discovery was that the larger acquisition price, the higher the target returns. The analysis of interstate mergers showed similar results. The analysis documented significant positive abnormal returns for target banks and insignificant negative abnormal returns for acquiring banks during the announcement.