Spatial Asset Pricing: A First Step

People choose where to live and how much to invest in housing. Traditionally, the first decision has been the domain of spatial economics, while the second has been analyzed in finance. Spatial asset pricing is an attempt to combine equilibrium concepts from both disciplines. In the finance context, we show how spatial decisions can be framed as an expanded portfolio problem. Within spatial economics, we identify the consequences of hedging motives for location decisions. We characterize a number of observable deviations from standard predictions in finance (e.g. the definition of the relevant market portfolio for the pricing of risk includes homeownership rates) and in spatial economics (e.g. hedging considerations and the pricing of risk affect the geographic allocation of human capital).

Homeownership: Low Household Mobility, Volatile Housing Prices, High Income Dispersion

We develop a dynamic stochastic equilibrium model of two locations within a city where heterogeneous households make joint location and tenure mode decisions. To investigate the effect of homeownership on equilibrium prices and allocations, we compare the response of this model economy to a labor shock with that of a rental-only version. This comparison yields three results. First, homeownership enables more households to remain in the more desirable location at the expense of newcomers. Second, homeownership adds to the volatility of the housing market. Third, homeownership may amplify the dispersion of household income within a location. Homeownership raises distributional issues. The households who consume the most housing gain the most from the ability to own their home. Newcomers to the city are the main losers.

Housing Market Fluctuations in a Life-Cycle Economy with Credit Constraints

This paper presents a first step towards a new theory of housing market fluctuations. We develop a life-cycle model where agents face credit constraints and their housing consumption is restricted to a discrete set of possibilities. The market interaction of young credit constrained agents climbing the property ladder with old agents trading down, generates co-movements of aggregate house prices, volume of transactions and income, consistent with the patterns observed in the U.S. and the U.K. Under plausible assumptions, the model reproduces the slight lead of transaction volume over the other two series as documented in the data. Our theory asserts that the fluctuations in housing prices depend crucially on fluctuations in the current income of young households (the first-time buyers). Thus, it sheds light on why housing prices are more volatile than GDP, and why they exhibit some degree of predictability in a market where households optimize over the timing of their transactions.Housing Demand, Income Fluctuations, Overlapping Generations, Collateral Constraint

Boom In, Bust Out: Young Households and the Housing Price Cycle

The UK experienced a major residential real estate boom-bust cycle from the mid-Eighties to the mid-Nineties, accompanied by unprecedented shifts in the owner occupancy rate of young households. Previous empirical analyses have pointed toward income changes and financial deregulation as the likely causes of this episode, with little to say about the differential effects on various age groups. We show that, in a life-cycle model with income heterogeneity and credit constraints, the observed co-movements of housing prices and owner occupancy rates can be explained as an equilibrium response to income and credit market shocks. Our findings suggest that the financial liberalisation of the early Eighties was crucial for the unparalleled increase in the owner occupancy rate of young households during the boom.Housing Demand, Income Fluctuations, Overlapping Generations, Collateral Constraint

House Price Volatility and the Housing Ladder

This paper investigates the effects of housing price risk on housing choices over the lifecycle. Housing price risk can be substantial but, unlike other risky assets which people can avoid, the fact that most people will eventually own their home creates an insurance demand for housing assets early in life. Our contribution is to focus on the importance of home ownership and housing wealth as a hedge against future house price risk for individuals moving up the ladder - people living in places with higher housing price risk should own their first home at a younger age, should live in larger homes, and should be less likely to refinance. These predictions are tested and shown to hold using panel data from the United States and Great Britain

Saving up or settling down: Home ownership over the life cycle

In a Bewley model with endogenous price volatility, home ownership and mobility across locations and jobs, we assess the contribution of financial constraints, housing illiquidities and house price risk to home ownership over the life cycle. The model can explain the rise in home ownership and fall in mobility over the life cycle. While some households rent due to borrowing constraints in the mortgage market, factors that affect propensities to save and move, such as risky house values and transactions costs, are equally important determinants of the ownership rate. © 2013 The Authors

Direct Visualization by Cryo-EM of the Mycobacterial Capsular Layer: A Labile Structure Containing ESX-1-Secreted Proteins

The cell envelope of mycobacteria, a group of Gram positive bacteria, is composed of a plasma membrane and a Gram-negative-like outer membrane containing mycolic acids. In addition, the surface of the mycobacteria is coated with an ill-characterized layer of extractable, non-covalently linked glycans, lipids and proteins, collectively known as the capsule, whose occurrence is a matter of debate. By using plunge freezing cryo-electron microscopy technique, we were able to show that pathogenic mycobacteria produce a thick capsule, only present when the cells were grown under unperturbed conditions and easily removed by mild detergents. This detergent-labile capsule layer contains arabinomannan, α-glucan and oligomannosyl-capped glycolipids. Further immunogenic and proteomic analyses revealed that Mycobacterium marinum capsule contains high amounts of proteins that are secreted via the ESX-1 pathway. Finally, cell infection experiments demonstrated the importance of the capsule for binding to cells and dampening of pro-inflammatory cytokine response. Together, these results show a direct visualization of the mycobacterial capsular layer as a labile structure that contains ESX-1-secreted proteins

Modelling UK house prices with structural breaks and conditional variance analysis

This paper differs from previous research by examining the existence of structural breaks in the UK regional house prices as well as in the prices of the different property types (flats, terraced, detached and semi-detached houses) in the UK as a whole, motivated by the uncertainty in the UK housing market and various financial events that may lead to structural changes within the housing market. Our paper enhances the conventional unit root tests by allowing for structural breaks, while including structural break tests strengthens our analysis. Our empirical results support the existence of structural breaks in the mean equation in seven out of thirteen regions of the UK as well as in three out of four property types, and in the variance equation in six regions and three property types. In addition, using a multivariate GARCH approach we examine both the behaviour of variances and covariances of the house price returns over time. Our results have significant implications for appropriate economic policy selection and investment management

Multiple M. tuberculosis Phenotypes in Mouse and Guinea Pig Lung Tissue Revealed by a Dual-Staining Approach

A unique hallmark of tuberculosis is the granulomatous lesions formed in the lung. Granulomas can be heterogeneous in nature and can develop a necrotic, hypoxic core which is surrounded by an acellular, fibrotic rim. Studying bacilli in this in vivo microenvironment is problematic as Mycobacterium tuberculosis can change its phenotype and also become acid-fast negative. Under in vitro models of differing environments, M. tuberculosis alters its metabolism, transcriptional profile and rate of replication. In this study, we investigated whether these phenotypic adaptations of M. tuberculosis are unique for certain environmental conditions and if they could therefore be used as differential markers. Bacilli were studied using fluorescent acid-fast auramine-rhodamine targeting the mycolic acid containing cell wall, and immunofluorescence targeting bacterial proteins using an anti-M. tuberculosis whole cell lysate polyclonal antibody. These techniques were combined and simultaneously applied to M. tuberculosis in vitro culture samples and to lung sections of M. tuberculosis infected mice and guinea pigs. Two phenotypically different subpopulations of M. tuberculosis were found in stationary culture whilst three subpopulations were found in hypoxic culture and in lung sections. Bacilli were either exclusively acid-fast positive, exclusively immunofluorescent positive or acid-fast and immunofluorescent positive. These results suggest that M. tuberculosis exists as multiple populations in most conditions, even within seemingly a single microenvironment. This is relevant information for approaches that study bacillary characteristics in pooled samples (using lipidomics and proteomics) as well as in M. tuberculosis drug development