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Corporate Equity and Commercial Property Market 'Bubbles'

Author

Listed:
  • Patric H. Hendershott

    (Aberdeen University Business School, Old Aberdeen, Scotland, UK, phh3939@uslink.net)

  • Robert J. Hendershott

    (Finance Department, Leavey School of Business, Santa Clara University, Santa Clara, CA 95053, USA, rhendershott@scu.edu)

  • Charles R. W. Ward

    (Department of Real Estate and Planning, School of Business, University of Reading, Reading, RG6 6AW, UK, Ward@reading.ac.uk)

Abstract

Periodic sharp sustained increases and then reversals in asset prices lead many to posit irrational price 'bubbles'. The general case for bubbles is that asset prices simply move too much given the future cash flows the assets are reasonably likely to produce. A corollary for property is that observed mean reversion in real cash flows is not reflected in investor valuations, resulting in asset values being too high when real cash flows are high and vice versa. This paper summarises some evidence on large corporate equity and commercial property price movements and present arguments for and against the existence of irrational bubbles.

Suggested Citation

  • Patric H. Hendershott & Robert J. Hendershott & Charles R. W. Ward, 2003. "Corporate Equity and Commercial Property Market 'Bubbles'," Urban Studies, Urban Studies Journal Limited, vol. 40(5-6), pages 993-1009, May.
  • Handle: RePEc:sae:urbstu:v:40:y:2003:i:5-6:p:993-1009
    DOI: 10.1080/0042098032000074281
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    References listed on IDEAS

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    Cited by:

    1. Escobari, Diego & Jafarinejad, Mohammad, 2016. "Date stamping bubbles in Real Estate Investment Trusts," The Quarterly Review of Economics and Finance, Elsevier, vol. 60(C), pages 224-230.
    2. John Fry & Andrew Brint, 2017. "Bubbles, Blind-Spots and Brexit," Risks, MDPI, vol. 5(3), pages 1-15, July.
    3. Patric Hendershott & Robert J. Hendershott & Bryan D. MacGregor, 2005. "Evidence on Rationality in Commercial Property Markets: An Interpretation and Critique," NBER Working Papers 11329, National Bureau of Economic Research, Inc.

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