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Competing Risks in a Time on the Market Analysis

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  • Erik R. de Wit

    () (Finance Group, University of Amsterdam)

Abstract

Theoretical models on the selling process in the housing market are scarce. Taylor (1999) specifies a model where time-on-the-market gives a quality signal of the house to potential buyers if inspection outcomes of the house are not public. We specify a duration model with competing risks, where the competing risks are a sale or a withdrawal from the market. We use a unique administrative dataset from the Netherlands. We find negative duration dependence in the hazard of sale and positive duration dependence in the hazard of withdrawal confirming the empirical predictions from Taylor (1999).

Suggested Citation

  • Erik R. de Wit, 2010. "Competing Risks in a Time on the Market Analysis," Tinbergen Institute Discussion Papers 10-108/2, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20100108
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    References listed on IDEAS

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    1. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
    2. Huang, Ju-Chin & Palmquist, Raymond B, 2001. "Environmental Conditions, Reservation Prices, and Time on the Market for Housing," The Journal of Real Estate Finance and Economics, Springer, vol. 22(2-3), pages 203-219, March-May.
    3. Stephen G. Donald & David A. Green & Harry J. Paarsch, 2000. "Differences in Wage Distributions Between Canada and the United States: An Application of a Flexible Estimator of Distribution Functions in the Presence of Covariates," Review of Economic Studies, Oxford University Press, vol. 67(4), pages 609-633.
    4. Anglin, Paul M & Rutherford, Ronald & Springer, Thomas M, 2003. "The Trade-Off Between the Selling Price of Residential Properties and Time-on-the-Market: The Impact of Price Setting," The Journal of Real Estate Finance and Economics, Springer, vol. 26(1), pages 95-111, January.
    5. Curtis R. Taylor, 1999. "Time-on-the-Market as a Sign of Quality," Review of Economic Studies, Oxford University Press, vol. 66(3), pages 555-578.
    6. Caplin, Andrew & Leahy, John, 1996. "Trading Costs, Price, and Volume in Asset Markets," American Economic Review, American Economic Association, vol. 86(2), pages 192-196, May.
    7. Olsen, Edgar O, 1969. "A Competitive Theory of the Housing Market," American Economic Review, American Economic Association, vol. 59(4), pages 612-622, Part I Se.
    8. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    9. Lazear, Edward P, 1986. "Retail Pricing and Clearance Sales," American Economic Review, American Economic Association, vol. 76(1), pages 14-32, March.
    10. Job Swank & Jan Kakes & Alexander F. Tieman, 2002. "The housing ladder, taxation, and borrowing constraints," MEB Series (discontinued) 2002-9, Netherlands Central Bank, Monetary and Economic Policy Department.
    11. Zuehlke, Thomas W, 1987. "Duration Dependence in the Housing Market," The Review of Economics and Statistics, MIT Press, vol. 69(4), pages 701-704, November.
    12. Gwilym Pryce & Kenneth Gibb, 2006. "Submarket Dynamics of Time to Sale," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 34(3), pages 377-415, September.
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    More about this item

    Keywords

    time-on-the-market; duration models; household finance; housing market;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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