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Locational Determinants of Real Estate Valuation: an Analysis of Spatial Autocorrelation in the Hedonic Pricing of Real Estate

Description: Recent studies of the valuation of real estate have concentrated on the use of hedonic pricing techniques in which the implicit prices of the component characteristics of an asset are inferred from the observed sale price using regression analysis. All of these studies include as explanatory variables one or more locational factors, such as distance to the central business district, as proxies for the effect that location has on the utility of land. In this research, the explicit consideration of the location of real estate in terms of the geographic or Cartesian coordinates (spatial attributes) of observed sales is shown to be a potential substitute for such proxies, either wholly or in part. Such use of spatial attributes could improve the usefulness of the hedonic methodology while at the same time significantly reducing cost and eliminating sources of error.
Date: May 1992
Creator: Shampton, John F.

The Information Content of Pension Fund Asset Reversion

Description: Prior studies on the impact of the termination of overfunded defined benefit pension plans on shareholders' wealth have produced conflicting findings. The first study on the stock market reaction to pension plan termination was conducted by Alderson and Chen (1986); this study claimed that shareholders realize significant positive abnormal returns around the termination announcement date. A more recent study, by Moore and Pruitt (1990), disclaimed the findings of Alderson and Chen. Reexamination of these two studies with additional evidence and the use of the appropriate announcement date suggests that termination of pension plans is associated with significant wealth gain to shareholders. This study also analyzes samples from periods prior to and after the imposition in 1986 of a 10 percent excise tax on recaptured excess pension assets. The empirical results suggest that shareholders experience significant positive wealth effects for the pre-tax (1980-85) period and no wealth effects for the post-tax (1986-88) period. The primary purpose of this study is to determine the impact of stock market reaction upon shareholders' wealth under the partial anticipation hypothesis. The pre-tax sample is analyzed by isolating the expected terminators using the multiple discriminant analysis model. This study finds significant positive abnormal returns only for firms that are not anticipated by the investors as potential terminators. The results of this study do not lend support to either the "separation" or the "integration" hypothesis as proposed by Alderson and Chen (1986). Instead, the results are consistent with the information hypothesis that the market reacts to unanticipated events that provide new information. Cross-sectional regression analysis of unexpected terminators suggests that the abnormal performance of stocks of pension terminating firms is explained by the firms' debt ratio and the amount of surplus pension assets. It can be inferred that firms may resort to recapturing excess pension assets as ...
Date: August 1992
Creator: Shetty, Shekar T.