Evidence on rationality in commercial property markets

an interpretation and critique

Patric Hendershott, Robert Hendershott, Bryan MacGregor

Research output: Contribution to journalArticle

Abstract

Periodic sharp sustained increases and then reversals in asset prices lead many to posit irrational price bubbles. The general case for irrationality is that real asset prices simply have moved too much given the future real cash flows the assets are reasonably likely to produce. A specific argument for property is that observed mean reversion in real cash flows has not been reflected in investor valuations, resulting in asset values being too high when real cash flows were high and vice versa. This study interprets, critiques and extends existing analyses of movements in real commercial property prices during the late 1980s and early 1990s.
Original languageEnglish
Pages (from-to)147-172
Number of pages26
JournalJournal of Real Estate Literature
Volume14
Issue number2
Publication statusAccepted/In press - 2006

Fingerprint

Property market
Rationality
Cash flow
Asset prices
Price bubbles
Irrationality
Reversal
Property prices
Investors
Mean reversion
Assets
Asset value

Cite this

Evidence on rationality in commercial property markets : an interpretation and critique. / Hendershott, Patric; Hendershott, Robert; MacGregor, Bryan.

In: Journal of Real Estate Literature, Vol. 14, No. 2, 2006, p. 147-172.

Research output: Contribution to journalArticle

@article{97a2b8d5dd47423999a936c17901982e,
title = "Evidence on rationality in commercial property markets: an interpretation and critique",
abstract = "Periodic sharp sustained increases and then reversals in asset prices lead many to posit irrational price bubbles. The general case for irrationality is that real asset prices simply have moved too much given the future real cash flows the assets are reasonably likely to produce. A specific argument for property is that observed mean reversion in real cash flows has not been reflected in investor valuations, resulting in asset values being too high when real cash flows were high and vice versa. This study interprets, critiques and extends existing analyses of movements in real commercial property prices during the late 1980s and early 1990s.",
author = "Patric Hendershott and Robert Hendershott and Bryan MacGregor",
year = "2006",
language = "English",
volume = "14",
pages = "147--172",
journal = "Journal of Real Estate Literature",
issn = "0927-7544",
publisher = "American Real Estate Society",
number = "2",

}

TY - JOUR

T1 - Evidence on rationality in commercial property markets

T2 - an interpretation and critique

AU - Hendershott, Patric

AU - Hendershott, Robert

AU - MacGregor, Bryan

PY - 2006

Y1 - 2006

N2 - Periodic sharp sustained increases and then reversals in asset prices lead many to posit irrational price bubbles. The general case for irrationality is that real asset prices simply have moved too much given the future real cash flows the assets are reasonably likely to produce. A specific argument for property is that observed mean reversion in real cash flows has not been reflected in investor valuations, resulting in asset values being too high when real cash flows were high and vice versa. This study interprets, critiques and extends existing analyses of movements in real commercial property prices during the late 1980s and early 1990s.

AB - Periodic sharp sustained increases and then reversals in asset prices lead many to posit irrational price bubbles. The general case for irrationality is that real asset prices simply have moved too much given the future real cash flows the assets are reasonably likely to produce. A specific argument for property is that observed mean reversion in real cash flows has not been reflected in investor valuations, resulting in asset values being too high when real cash flows were high and vice versa. This study interprets, critiques and extends existing analyses of movements in real commercial property prices during the late 1980s and early 1990s.

M3 - Article

VL - 14

SP - 147

EP - 172

JO - Journal of Real Estate Literature

JF - Journal of Real Estate Literature

SN - 0927-7544

IS - 2

ER -