Date of Award

Spring 1-1-2018

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

First Advisor

Edward Van Wesep

Second Advisor

Diego Garcia

Third Advisor

Nathalie Moyen

Fourth Advisor

Thomas Thibodeau

Fifth Advisor

Martin Boileau

Abstract

My dissertation studies the role of informational and institutional determinants of house prices and liquidity.

In the first chapter, I quantify the effect of buyers' uncertainty about a home's quality on its pricing and liquidity. I first develop a parsimonious model of home sale in which buyers learn about the home's quality from a walkthrough and from the home's days-on-market. Quality uncertainty distorts prices and delays trade. As time passes, buyers become pessimistic and sale prices fall. Using transaction-level data from Denver, Charlotte, and Detroit, I structurally estimate counterfactual days-on-market and sale prices for six hundred thousand homes that sold between 2005 and 2015. The costs of quality uncertainty are borne by sellers of high quality homes through mispricing, and by sellers of low quality homes through illiquidity: relative to a market in which home quality were known to buyers, high quality homes take 11 days longer to sell, and sell for 8.0% less, while low quality homes take 47 days longer to sell, and sell for 4.5% more.

In the second chapter, I discuss work co-authored with Edward Van Wesep. We develop a model of asset pricing in which lenders value collateral using appraisals, defined as average selling prices of similar assets in recent transactions. The model features price-predictability, differential pricing for identical assets, "buyer's’’ and "seller's’’ markets, and associations between price appreciation, volume, and liquidity. We find support for the model's predictions in the markets for New York City taxi medallions, used airplanes, commercial and industrial real estate, and single-family homes.

In the third chapter, I investigate the internal finance of customer-owned firms. Customer owned financial institutions originate 11% of home loans. I propose a theory of internal finance for the customer owned firm. I show that its growth, pricing, and capital structure are tied together: higher sales tomorrow are achieved through higher prices today and lower leverage today. This result does not hold for a shareholder owned firm. I document stylized facts from the credit union industry and find that they are consistent with the theory's predictions. I discuss empirical implications for other customer owned firms.

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