Research Interests
1) Law and Economics is a relatively new branch of microeconomics that relaxes the "no transaction costs" assumption of the classical pure competition model. This requires a close examination of institutional factors in an economic system. "Institutional factors" are those things in a system that restrict freedom of choice. Naturally, the first of these that comes to mind is government, which in a capitalistic system is essentially a body of law enacted by people.
Ronald H. Coase was awarded the Nobel Prize in economics in 1991 for his study of transaction costs in economics. One of the notions to come from his work is that it is futile to enact laws to forbid behavior when economics are concerned. Failure to observe this truth results in many laws fraught with unintended consequences. I am interested in the study of how laws affect economic behavior.
My work in this area concentrates on aesthetic regulation. With
"The Emerging Fourth Wave of Aesthetic Regulation: Beauty is in the
Pocketbooks of the Beholder", with Jeffery M. Sharp,
Proceedings of the
"
In the latest of these articles we present a mathematical model describing how a local community's utility is affected by decisions made regarding aesthetic regulation. A copy of the Mathematica file containing that model is available here.
2) Risk in Real Estate is challenging as it has enjoyed little attention outside the finance paradigm. Applying Modern Portfolio Theory to real estate has limited usefulness as MPT requires that returns be normally distributed. When one drops the assumption of normality the range of possible outcomes is much broader.
My early work, somewhat tentative, was a survey piece on real estate investment trusts (REITs), an asset having characteristics of both financial (paper) assets and real assets:
"Zijn onroerend goed aandelen onroerend goed of aandelen?"
(Are REITs Stocks or Real Estate? A Review of the
Issues) VOGON Journaal (The
Thinking that the idea of "investment" might be separated from "speculation" lead to an article that demonstrated how linear programming could be used to refine an investor's propensity toward one or the other.
"Evaluating Future Input Assumption Risk", Appraisal Journal, April, 1998
The technique describes a way to rank properties based on the input assumptions one makes about future changes in deterministic variables. The template for that analysis can be obtained here.
A direct application of MPT to a real estate data set may be found in:
"Intracity Geographic Diversification of
Real Estate Portfolios: Preliminary Evidence from
Finally, my dissertation, titled Return Distributions of Private Real Estate Investments, addressed the non-normal distributional characteristics of investment property owned by individuals and found that real estate returns in that market are stable-Paretian (SP) distributed.
My dissertation contains four Mathematica files. One describes the useful ways a Fourier Transform may be employed. A second one contains a method for simulating a pdf for stable probability distributions. The third shows how to model a real estate acquisition varying holding period and economic cycles. The fourth provides a stable random number generator and method to illustrate "efficient" frontiers when asset returns are stable non-normal variates.
Miscellaneous Distractions. While my two main interests are described above, there are always a few other interesting puzzles that come along and remain in my "When I Get Time" box. Examples of preliminary work done on some of these are:
Applying the binomial options pricing model to Land Use Under Uncertainty, Sheridan Titman in his 1985 article showed how land use restriction might actually accelerate development activity. This worksheet illustrates the example in his article (and is slightly different as the article contains a misprint).
Harry Markowitz revolutionized the way we think about forming portfolios. An Excel version of the example in his book, Portfolio Selection, based on his doctoral dissertation, describes 3 assets and can be obtained here. The equivalent Mathematica file is also available here.
A Mathematica file containing a complete multi-period projection technique for a real estate investment is available here also. In this file one may examine the interdependencies of deterministic variables and perform sensitivity analysis
If you do not have Mathematica, you may
download a free version of MathReader from Wolfram.com,
makers of Mathematica.